There are a number (five to be exact) Australian banks that aren’t too happy with the Federal Government at the moment.
A new bank levy of 6 basis points will be introduced by government to start on 1 July on large banks with liabilities above $100 billion (excluding customer deposits of less than $250,000 and additional capital requirements). This measure is forecast to secure $6.2 billion over the forward estimates to support budget repair.
The general consensus is that this new tax is more of a political point scoring exercise which happens to fix the governments spiralling debt position, than a well-thought out piece of policy.
The banks have responded angrily, with Westpac Group CEO, Brian Hartzer saying the cost of any new tax is ultimately borne by shareholders, borrowers, depositors, and employees. This was backed up by the CEO of Commonwealth Bank, Ian Narev who said that as every business owner or employee knows, every extra cost needs to be borne by customers or shareholders, or a combination of both. According to Deutsche analyst Andrew Triggs, the levy could hit bank profits by between 3-6%.
Both the Treasurer and Prime Minister have warned the banks to not try and pass the new tax on to their customers, especially given that the tax didn’t apply to mortgages or smaller deposit accounts. The suggestion of a move by the major banks to recoup the levy costs has seen both respond by reminding the banks that the ACCC will be watching them closely. If that doesn’t work, customers should vote with their feet and move their business to another (smaller) bank.