Policy paper on de-banking tabled in Parliament

In March 2022, the-then government issued terms of reference requesting that the council work with AUSTRAC, the Australian Competition and Consumer Commission and the Department of Home Affairs to provide advice on potential policy responses to address de-banking in selected industries in Australia.

A working group led by Treasury and comprising representatives from the above agencies have examined key trends in de-banking and policy options. This process involved consulting with representatives from the banking, financial technology, digital currency and remittance industries.

Over the past decade, Australian banks have been de-banking customers, including fintechs, DCEs and remittance providers.

De-banking occurs when a bank declines to offer a core banking service to, or withdraws a core banking service from, a customer and can have a devastating impact on businesses and individuals. It can also put a handbrake on competition and innovation in emerging sectors of the economy.

The council came back with four recommendations for the government to consider:

• That voluntary data collection on de-banking be undertaken by the four major banks, following which, consideration will be given to a formal phase of data collection, subject to appropriate resourcing for relevant agencies
• That all banks implement five related measures to improve transparency and fairness in relation to de-banking. These measures would apply to all instances of de-banking
• That the four major banks be advised of the government’s expectations that they publish guidance applicable to the DCE, fintech and remittance sectors concerning their risk tolerance and their requirements to bank these sectors
• That consideration be given by government to funding targeted education, outreach and guidance to the fintech, DCE and remittance sectors. If the government is interested in pursuing capability uplift, the participating agencies can advise on implementation options

Federal Treasurer Jim Chalmers said de‑banking can increase the risks for affected businesses by forcing them to conduct transactions exclusively in cash.

“It is often experienced by commercial customers perceived to be in high‑risk industries, such as the financial technology, digital currency exchange and remittance sectors,” he said.

“The Government is committed to promoting innovation and competition in the financial services sector and will continue to work with affected customers.”

The government’s response to the recommendations in the paper will be released in due course.

The policy paper is available on the Council of Financial Regulators website.