A People's Bank could benefit the bush

29 Dec, 2009 10:28 AM
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IT'S got such a simple ring to it: People's Bank. And it's not only pithy, it's also easily understandable and catchy too.

More to the point, it's a concept that people are comfortably able to grasp and are unlikely to run away from, even when the words ''publicly owned'' are mentioned in the same sentence.

To misquote Abraham Lincoln, it would be ''a bank of the people, by the people, for the people''.

Or would it? And if it did get off the ground, would it work and, just as importantly, would the people sign up to be its customers?

These are all legitimate questions and ones that need to be asked as the debate about such an institution picks up steam as a consequence of the growing dominance of the big four banks.

The idea of a People's Bank to counter their formidable power was raised earlier this year by a group of six economists who urged consideration of the proposal by the Federal Government as part of a wide-ranging inquiry into the financial services industry.

Given the Government's involvement in allowing the majors to get bigger by waving through the acquisitions of St George Bank by Westpac and Bankwest by Commonwealth Bank, it was understandable that Treasurer Wayne Swan was lukewarm on either suggestion.

Nevertheless, the Government has inadvertently breathed new life into the People's Bank idea with the appointment last week of former National Australia Bank senior executive Ahmed Fahour as the boss of Australia Post.

The postal network is seen by some as the easiest way to create a natural competitor to the big four, based on the experience of what has happened in New Zealand where Kiwibank, the banking arm of the post office, has in seven years become a rival to the major banks there, all four of which are owned by the Australian giants.

So, there is proof that such an idea can work. But is there the need for it here and are there alternatives?

In certain geographical areas such as country towns, where there may be only one bank or none at all as a consequence of the large-scale branch closures imposed by the majors in the 1990s, the answer is almost certainly yes.

While the big banks have since realised the folly of that policy, the lack of a decent banking alternative in rural and outback areas is still clear. It's a gap in the market that a Post Bank could easily exploit.

But in the more populated centres (and in certain key states and territories) there may be less of a case for a publicly owned competitor to go head-to-head with the majors.

Victoria has a nimble and decent-sized rival to the big four in the shape of Bendigo and Adelaide Bank, which has also pushed into the territory of ''people-style'' institutions with its community branches in which customers are required to invest.

Queensland has Suncorp-Metway and Bank of Queensland, two banks that have experienced funding difficulties as a result of the global financial crisis but that still ''maintain the rage'' as regional franchises.

It is primarily in NSW, Western Australia and South Australia, therefore, that the problems lie. Losing St George (NSW), the St George-owned Bank SA (South Australia) and Bankwest (Western Australia, but with previous big ambitions for the eastern states) to the majors has really hurt the forces of competition.

While their demise as independents suggests there is an opportunity for a new institution to replace them, the trials and tribulations of those three (and the relative lack of success of other regional banks to make much impact in their ''home'' states) indicates that the hurdles facing a People's Bank may be too high for even it to overcome.

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READER COMMENTS

Ron N
30/12/2009 5:31:44 AM, on Farm Weekly

We had a Peoples Bank. It was started in 1912 by a far-sighted pollie named King O'Malley. It was called the Commonwealth Bank. It kept the big banks in line for over 80 years - until greedy and short sighted politicians who wouldn't reach King O'Malleys knees in stature as Statesmen, sold it off to "commercial interests". The big banks must have a special celebration every year, on the anniversary of when they shafted the Aussie public, and conned the idiotic, short-sighted politicians, who sold "our" bank, and who left us at the mercy of the greedy bankers - who, I might add, in case one forgets too quickly - were also responsible for the 2008 near-collapse of the financial world - and who have left vast numbers of taxpayers to foot the bill for their greed - while they got away scot-free.

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