CANBERRA: The nation’s biggest bank says the federal government’s $500 million-a-year tax on bank deposits might be passed on to customers via higher fees or lower interest rates for savers.
The Commonwealth Bank of Australia said it backs the financial system inquiry’s recommendation that deposit insurance only be paid for after any bank collapse.
An upfront levy, which is being planned by the Abbott government despite the inquiry’s recommendation, “would impose an ongoing cost on industry, which may be passed on to consumers through higher fees or lower interest rates for deposit accounts,” CBA said in a submission to Treasury in response to the inquiry’s final report.
ANZ Banking Group is also opposed to a tax on deposits, saying it would be unnecessary given the inquiry chaired by David Murray recommended making the banks “unquestionably strong” through higher levels of capital.
ANZ’s submission to Treasury also supports the model proposed by Mr Murray. Under the proposal, the costs of the so-called financial claims scheme, which guarantees bank deposits up to $250,000, are only paid when the scheme is triggered and the funds from the liquidation of a failed bank are insufficient to recoup the amount paid by the government to depositors.
“ANZ agrees with maintaining the financial claims scheme as an ex-post funding structure. FSI proposals to further strengthen the system reduce the need for an ex-ante funded scheme,” ANZ said.
Forcing the banks to hold higher levels of capital creates a larger buffer of equity, protecting depositors if the value of a bank’s assets falls.
National Australia Bank’s submission to Treasury lodged on Tuesday did not address the deposit tax. Westpac Banking Corp has not yet made its submission public.
The Australian Bankers’ Association, the lobby group for the banks, on Tuesday called on the government to “announce this tax on depositors will be scrapped”.
The imposition of a deposit tax looks likely to pass parliament, with both Labor and the Greens in favour of the idea, which was initially raised by shadow treasurer Chris Bowen when he was treasurer in August 2013. It was criticised by Treasurer Joe Hockey at the time but the government has adopted the policy because of the “budget emergency”.
The money raised from the tax would be invested in a Financial Stability Fund and only used in the unlikely event of a bank collapse, but the fund would also prop up the budget by offsetting gross debt like the Future Fund does.
