The Australian Bankers’ Association (ABA) continues to argue that the establishment of the bank savings levy, announced on Friday, is ‘unnecessary’ and will have an ‘adverse impact on banks’ depositors’. However, proponents argue the so-called ‘Financial Stability Fund’ is fair and serves as a precautionary protection for bank customers.
Steven Münchenberg, CEO of the ABA, says the banking industry wants to see the Federal Government re-consider their decision and would like to see the Coalition rule out the fund should it win the election in September.
“At a minimum, this fund should not be introduced unless it is considered as part of a broad ranging inquiry into the financial services sector,” says Münchenberg.
The ABA also believes that taxing savers to create a fund is unnecessary.
“The Australian banking system is very safe. This was proven during the global financial crisis, when our banking sector coped well with the strains of that very difficult period, unlike banks overseas which failed or had to be bailed out by their Governments…In Australia, no depositor has suffered from a bank failure since the 1890s.”
However, Treasurer Chris Bowen says the levy, which will ‘build gradually over time to a target size of 0.5%’ of protected deposits and is budgeted to raise A$408 million in its first six months, was well thought-out.
"[Glenn] Stevens, [John] Laker and [Greg] Medcraft are not known as radical or rash men. They are generally regarded as amongst the world's best financial regulators and when they make a recommendation, the Government should listen,” Bowen said in a media briefing on Friday.
Bowen noted that the IMF conducted a public review of Australia’s financial system and recommended that the country develop a financial stability fund with a subsequent levy as a matter of ‘high priority’.
"Unsurprisingly,” he said, “people in Australia's banks would prefer that the taxpayer continued to provide the guarantee with no charge to banks. That's an unsurprising position for them to take.”
"I've listened in particular to small banks and credit unions, and I have asked the Treasury to consult very carefully in the coming months to ensure that there is no anti-competitive effect, particularly for small banks and financial institutions."