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Tuesday, 3 May 1994
Page: 88

Senator McMullan —On 19 November 1993 (Hansard page 3282) Senator Kernot asked me a question without notice concerning, inter alia, the Government's support for the Code of Banking Practice and the implementation of recommendations of the Martin and Elliott committees to establish a comprehensive register of comparative interest rates and the associated charges and margins of banks.

  The Treasurer has provided the following information in answer to the honourable senator's question:

  "Average bank net interest margins (defined as net interest income divided by average interest earning assets) on the domestic business of most of the major Australian banks have increased slightly in 1992-93 over their levels in the preceding financial year. This reflects, inter alia, a reduction in banks' non-performing loans and improvements in the capital base of the banks (both of which increase banks' net interest earnings), and, as such, is consistent with the economic recovery.

  The Government welcomes the Code of Banking Practice and regards it as a major step forward in banker-customer relations. The objective of the Code of Banking Practice is to improve banker-customer relations through describing standards of good practice and service that will;

  ensure the full and effective written disclosure of price and other contractual information, and clear notification requirements relating to changes in interest rates and fees:

  require banks to have available, on request, general information regarding their obligations to their customers;

  underscore the banks' obligations to protect customers' privacy, and in particular the importance of customer consent before information held about them by their bank can be divulged to others;

  ensure that the liability incurred under a third party guarantee is limited and clearly specified, and that guarantors know that they have the opportunity to view all relevant information regarding their prospective liability prior to entering into the guarantee; and

  oblige banks to provide an effective mechanism for resolving disputes, including an impartial and external process, free of charge to the customer.

  While the Code is voluntary, for those institutions who agree to be bound by it, the relevant provisions will be contractually enforceable. The Government is assured that all member banks of the ABA that offer retail financial services will endeavour to achieve full compliance with the Code over the next 12 months.

  Monitoring of the Code will be conducted by the Australian Payments System Council whose membership includes industry, government and consumer representatives. The Government intends to initiate a formal review of the Code within three years, or sooner if circumstances warrant, in consultation with all interested parties.

  Various recommendations of the Martin and Elliott Committees favoured the development of a comparative interest rate and the disclosure of bank charges and margins. The Banking Code provides for the disclosure of charges, but not for the universal compulsory provision of a comparative interest rate.

  However, the Government has budgeted to provide seed funding of $300,000 to help establish a privately operated comparative financial information centre. The centre will provide consumers with ready access to information enabling them to compare, on any one day, credit card and other products offered by different financial institutions. Officials are currently undertaking the necessary processes whereby interested parties may tender to establish and operate such a service. While the centre's initial emphasis will be on consumer credit products (credit cards), it is expected that its focus will expand to provide a full range of financial information to enable consumers to select the institution that, at the time of inquiry, provides the deposit and/or credit products most suited to their individual requirements.

  In addition, the Prices Surveillance Authority (PSA) has been requested to monitor the recently deregulated credit card interest rates and fees, merchant fees and merchant pricing practices over a three year period, and to publish the results. Within that same time period, the PSA will also undertake a full inquiry into these pricing practices and will include in its recommendations proposals on the nature and extent of arrangements for the ongoing monitoring of credit card pricing, merchant fees and the pricing of cash versus credit sales."