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Bank fees rise despite slowing economy -

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PETER CAVE: New figures from the Reserve Bank show that commercial banks are making more than ever
from the fees they squeeze from their customers. Income from fees rose 8 per cent in 2008 to
$11.6-billion.

But the RBA says the increase isn't from higher charges but because more people and businesses are
using banking services. The figures will place more pressure on the big banks to pass on official
cuts in interest rates.

For more, I'm joined by our finance reporter, Sue Lannin. Sue, a lot of people would be surprised
by that $11.6-billion figure.

SUE LANNIN: Yes, it's pretty big. The RBA figures show the banks took home nearly $1-billion more
in fees and charges in 2008. And of course that's not popular because of the fall in official
interest rates that the banks haven't passed on and also the Government guarantee on deposits and
wholesale borrowing by the banks.

Now the RBA figures show that the income from fees actually grew less quickly than banking assets
in 2008 and the rise in revenue from fees was mainly because of a greater use of banking services
rather than because of higher charges.

The RBA looked at 18 financial institutions including the big banks. Here's Shaun Cornelius, the
chief executive of independent financial website InfoChoice.

SHAUN CORNELIUS: The income that the banks are making increased by 8 per cent when you compare the
2008 figures to 2007. That's more or less consistent with the increase for the previous year.

However, you know the silver lining is if you look at the average growth over the last five years,
that was 11 per cent. So a growth in fee income to them of 8 per cent is, does seem to suggest that
their fee income is growing at a slower rate, which is good for consumers at the end of the day.

However, it's still a big number. The 2008 number, fee income to banks was $4.8-billion which is
more or less $680 per household.

PETER CAVE: Shaun Cornelius from InfoChoice.

Sue, what are these services we're willing sending out $680 a household for?

SUE LANNIN: Well Peter, many people won't be surprised that it's credit cards. That's actually the
fastest growing area for last year. So income from fees in 2008 grew 11 per cent. But interestingly
that was actually much lower than the income from fees over the five years, 2002-2007.

Now InfoChoice says that's because the rise in 2008 could be because there's a link between the
tough economic times and higher income from fees. The banks are seeing higher rates of defaults on
credit cards, so people are missing their payments and getting late fees. And the big area where
banks have increased their charges is on credit cards.

There was also fewer home loans in 2008, according to the RBA. So the rate of increase of fees
actually went down.

PETER CAVE: The investment bank Macquarie Group says that the Federal Government's plans to make
workers pay the tax up front on the shares they're granted by their employer may affect its ability
to change the way it compensates executives. What's it talking about?

SUE LANNIN: Yes. Well these are the changes we saw in the Budget where the Government said last
week that workers earning more than $60,000, that were eligible for employee share schemes would
have to pay tax up front on the shares and options. There's been a big campaign by the business
community and also the unions on that.

Now basically Macquarie is saying that it wanted to cut executive bonuses and it still may but it
will have to maybe revise its pay arrangements because of these Budget measures unless they're
changed.

PETER CAVE: Sue Lannin, live in the studio.