Federal government backs CFR debanking strategy

The Albanese government has released its response to the Council of Financial Regulator’s (CFR) August 2022 report on potential policy responses to debanking, supporting its four recommendations.

The CFR had looked at potential policy responses that could be taken to address what happens when a bank declines to offer a core banking service to, or withdraws a core banking service from, a customer in Australia.

Debanking is often experienced by customers considered to be in high‑risk industries, such as the financial technology, digital currency exchange, and remittance sectors.

The CDR suggested the government should take the following actions:

• Collect debanking data to provide additional information into the extent and nature of the debanking problem and inform any future policies
• Introduce transparency and fairness measures by ensuring all banks implement five measures to improve fairness in debanking, by documenting the response for debanking a customer, provide the customer with those reasons, ensure debanked customers have access to their internal dispute resolution procedures, provide a minimum of 30 days’ notice before debanking a customers, and self-certify that they will adhere to these measures
• Advise the major banks of its expectation that they publish guidance applicable to the digital currency exchanges (DCE), fintech, and remittance sectors concerning their risk tolerance and their requirements to bank these sectors
• Consider funding targeted education, outreach, and guidance to the fintech, DCE, and remittance sectors.

On Thursday (29 June), Treasurer Jim Chalmers said that the government supports the four recommendations.

While noting the challenges associated with data collection, he said that the government views data collection to be “a fundamental aspect of the response to debanking” and enables monitoring of the extent and nature of debanking and helps inform any future policy formulation and monitoring.

“Treasury will work with APRA and the four major banks to design and scope the voluntary data collection to ensure the data collected is useful and the process is iterative,” the government said in its response.

Mr Chalmers also supported the move to require banks to implement the five measures to improve transparency and fairness, stating that they would be “important to addressing some of the main frustrations experienced by affected businesses”.

“Treasury will work with banks and AUSTRAC to ensure the measures in this recommendation are implemented to the greatest extent possible,” the response outlined.

The government has also said it will not only advise banks that it expects them to communicate their requirements to both existing and potential customers “clearly and proactively” (prior to refusing or withdrawing banking services) but also encourage the major banks to publish information on their requirements and risk tolerance of the DCE, fintech, and remittance sectors.

He added that the government “supports the objectives” of the capability uplift recommendation and that funding of targeted education, outreach, and guidance to the fintech, DCE, and remittance sectors may be considered by the government as part of any future initiatives.

Mr Chalmers commented: “Taking action on debanking will support Australia’s technology sector to grasp opportunities by improving transparency and fairness in the banking sector…

“Debanking can stifle competition and innovation for certain sectors and increase the risk for affected businesses by forcing them to conduct transactions exclusively in cash.

“We want to help ensure customers in emerging sectors of the economy have access to bank accounts and the services they need.

“Our plan going forward is to work closely with regulators, banks, and affected sectors to ensure we can effectively implement the recommendations.”

[Related: Financial watchdogs to investigate debanking]