ABA refutes 'hocus pocus' TAI report claims

by Mackenzie McCarty12 Dec 2012

The Australian Bankers’ Association (ABA) has dismissed the latest report by The Australian Institute (TMI), released on Monday, as “spurious,” saying it demonstrates a lack of industry understanding.

Comments made in TAI senior research officer David Richardson’s report, 'New analysis questions independence of Australia's 'big four' banks', regarding “a small fraction” of bank profits being paid into superannuation accounts, the high level of bank ownership concentration and the idea that major banks don’t compete on price, have caused a minor furore at the association.

ABA chief executive,  Steven Münchenberg, says Australian Bureau of Statistics data shows that, as of June, 2012, 58% of bank share were attributed to households, either directly or through superannuation.

“Shares in the solid and reliable banks are a mainstay of superannuation investment, given the stability of earnings and relatively high dividends. It is almost inconceivable that a person with a superannuation account – in a balanced portfolio – would not hold bank shares and earn dividends towards their superannuation and financial security in retirement.”

Münchenberg says banks have paid out $19 billion in dividends this year, 7% more than last year.

“The bulk of that will have been paid to super fund holders and Australians who own bank shares, such as self-funded retirees.”

Münchenberg calls Richardson’s assertion that there is a high level of ownership concentration amongst the big four “false,” saying custodial nominees may hold shares on behalf of clients – but they can’t buy, sell or vote shares without their clients’ instructions.

“The majority of clients are Australian institutions, of which a majority are superannuation funds, including industry and retail funds investing ordinary Australians’ retirement savings…Given custodial nominees cannot act without instructions from their clients, there can be no conflict of interest as claimed by TAI.”

Finally, referring to Richardson’s concern over a lack of major bank competition, Münchenberg says there is “ample” evidence of banks competing on price.

He claims banks are working to attract and retain mortgage customers, offering eligible clients a discount rate of around 70 basis points off the advertised standard variable rate.

“Stiff competition has seen bank margins fall. Narrowing margins are a further indicator there is competition across the banking sector…Also, competition between banks has led to major reductions in bank fees…In fact, average weekly fees paid by households have fallen for the past three years by 25%.”

Münchenberg says the ABA welcomes a debate on competition in the banking sector, but says he doesn’t appreciate TAI’s comments.

A sensible debate about competition needs to examine, for example, the availability of cost effective funding for smaller lenders…We would welcome a practical contribution to this debate from TAI, rather than reruns of ‘hocus pocus’ analysis.”


  • by Scott 12/12/2012 9:14:25 AM

    It would be helpful if there was a link to the TAI report.

  • by Wozza 12/12/2012 11:01:50 AM

    70 basis points off the advertised standard variable rate.
    What a furphy! Tell me any broker who quotes the SVR and does any business. Why doesnt the ABA encourage lenders to advertise the REAL rate instead "discounts". Now that's competition!

  • by Opinion WA 12/12/2012 12:22:56 PM

    Does anybody ever expect the HIA to come out and say "there is adequate levels of housing being completed at the moment to support population growth, so our members need to slow down production or risk oversupplying the market”. So why would we expect the ABA to come out and say "our members are making larger profits than ever before. It's probably time to give some back, we're recommending passing more back to customers". Industry bodies represent members interest, of course they couldn't agree with the TAI report (accurate or not)!