'Depositors haven't suffered a bank failure since 1890's, levy unnecessary'

by Mackenzie McCarty05 Aug 2013

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."


  • by Tony 5/08/2013 9:13:37 AM

    Think it is fine to have the fund implemented, as long as it isn't used as Government revenue and held purely for the purpose of savings requirements in need of a an Institutions collapse !!!

  • by Ray C 5/08/2013 9:20:21 AM

    The ABA also put out 6 Myths about the Banks and the Credit Crisis. None of which could be argued where myths. The Banks where strongly protected during the GFC due to Government's guaranteeing of deposits so much so that some 100 Non Bank lenders departed the Mortgage market critically effecting the small investor particularly in the small business market. This effect has continued to date.It is one of the many drivers behind the two speed economy we have experienced since the GFC Support only for the Banks and big business, small business continued to be destroyed.

  • by Chris C 5/08/2013 9:31:51 AM

    Don't our Banks already have this and borrowers already pay an interest margin for a security levy to the RBA on Capital Adequacy (ex Statutory Reserve Deposits) Why should we have another fund just to save the Govt pockets. If they better manage the country's finances it would be more than adequate to cover. The current Govt obviously does not care how much our debt grows..... they must be laughing behind closed doors wondreing how long until the public wakes up and votes them out. Imagine it would be the same as Insurance Companies that charge premiums for risks on the day but don't provision the funds away to be there for when they are required and suddenly we are faced with price rises when we should not really need them. Congrats to this Govt for seeing an opportunity to further tax the depositors this time - will pensioners be excluded from this tax or will they receive an increase in their pension payment to cover it...then again what's the difference between 2% and 2.5%....... a few days worth of meals I suppose.