Each edition we feature the views of a Local Government Association President. The following is from Councillor Peter Woods OAM, President Local Government Association of NSW.
The Association established a NSW Local Government Banking and Financial Services Task Force following a resolution adopted at the 1998 Annual Conference of the Local Government Association.
It was established in response to growing community concern about the deterioration in the provision of banking services. The trends in the provision of banking and financial services are causing hardship in the community and in many instances are undermining the viability of communities.
It is clear to all of us that a growing number of Australians have lost faith in the major banking and financial institutions. Since deregulation, the behaviour of our major banks has caused a great deal of aggravation in the community. Rampant branch closures, rapidly escalating fees, irresponsible lending practices and apparent indifference, bordering on contempt, towards customers have contributed to community dissatisfaction.
Branch closures are a particular concern. Over 1300 branches were closed across Australia between 1990 and 1998. There were 411 closures in NSW alone. The process continues. This is not just a problem for rural and remote communities.
Mass closures have occurred in both rural and metropolitan locations. Between 1993 and 1998, metropolitan areas lost 968 or 23% of branches while non-metropolitan areas lost 481 or 17% of branches. As most of us are aware, branch closures, and particularly the closure of the last branch, can have devastating effects on the community.
We are all aware of the behaviour of the banks and community feelings. We also know, despite the protestations of the banks, that a great deal of the criticism is justified.
It is acknowledged however, that banking like the rest of society has changed and banking cannot or even should not, be done in the way it was in the past. This does not however, justify the abandonment of any sense of community obligation by the banks.
Banks are not just like any other business. They are essential utilities. People cannot function in modern society without adequate access to the banking system. They are an integral component of society’s institutional infrastructure. This has traditionally given banks a certain degree of status and privilege, and this has survived deregulation to a large extent. This conveys an obligation to the community.
The responsibility to ensure that banks fulfil their obligation to the community really belongs to the Federal Government. The Federal Government could easily achieve the required level of community service obligation by embedding it as a banking licence requirement.
However, in their passion for deregulation, successive Federal Governments have lost sight of this responsibility. Apart from the ‘let the market rule’ ideology of the economic rationalists, it would be naive not to think that the banks have also exercised their formidable political clout.
We in Local Government are acutely aware of the community dissatisfaction with the banks and the impacts that the closures of banks are having on communities. With the abrogation of responsibility by the Federal Government the buck passes to Local Government. Increasingly, Local Government is being urged to do something about it.
There is no doubt that Local Government has a definite responsibility to ensure that the banking and financial services needs of the community are adequately satisfied. To use the cliche, Local Government is not just about roads, rates and rubbish.
Local Government is about building and maintaining prosperous and sustainable communities and all that this entails. The availability of banking and financial services is fundamental to community viability.
Local Government can and is responding in two primary ways:
- Taking on a facilitative role to retain services or to attract alternative service providers. For example, councils have been instrumental in having banking services restored by credit unions and community banks in many locations, or
- To take a hands on role, involving the investment of Local Government resources and playing an active role in establishment of solutions. At a local level this has involved councils establishing agencies of banks and delivering banking services alongside council services. At a higher level for example, the NSW Local Government Association is investigating opportunities to establish broader state wide and potentially national solutions.
It is clearly the responsibility of Local Government to attempt to redress the deterioration in the provision of banking services to large numbers of communities and particular social groups. A failure to respond to the community’s needs would represent gross negligence.
