
Issue No 3		05 March 1999

Unions

Big Boys Bank on Mergers

By John Graham - FSU Industrial Officer

Mergers of the big banks are back on the agenda, and the Finance Sector Union is leading the community campaign against them.


	Out to NAB a partner?

Incoming head of the National Australia Bank, Frank Cicutto this week declared the NAB would continue its high profile efforts to merge with another Australian bank.

His comments echoed those of new Westpac CEO, David Morgan only two weeks ago, calling for an end to the Government's policy prohibiting mergers.

These statements mark a continuation of the relentless campaign led by outgoing NAB CEO Don Argus, and supported by other major banks. Pressure from industry sources on the government has been intense, but fears of massive job loss, and the customer and community reaction have to date meant no green light for the banks.

Despite the public claims of the banks, reductions in service and increases in fees are likely to result from big bank mergers. Canadian Finance Minister, Paul Martin made that assessment late last year when he blocked the planned merger of two of Canada's largest four banks, the Bank of Montreal and the Royal Bank.

Despite an expensive PR campaign by the companies, pledging to reduce charges and increase access to services, the Canadian Government's independent evaluation of the plan spelt out the social costs of big bank mergers - and they weren't worth paying.

Finance Minister Martin, in blocking the plan, said:

"The mergers would lead to an unacceptable concentration of economic power in the hands of fewer, very large banks."

"...To give just one example, in the area of bank branching - the core of personal and small business banking in Canada... in the case of both mergers, there would be a negative impact on hundreds of communities, urban and rural."

In the Australian situation, that would speed up a process that is already well under way. The number of bank branches in NSW has collapsed over the course of this decade. From mid-1990 to mid-1998 the number of branches has decreased by 18%, with the biggest change being a 9% decline last year.

Research by the Finance Sector Union into the phenomenon shows that there is very real community concern over the impact of these changes. In a survey completed in mid-1998 they found that:

� 74% of people do not believe that branch closures are necessary for keeping costs down for customers

� over 80% believe electronic baking should not replace people's jobs

� 90% believe that the Federal Government should make Banks maintain current banking service levels.

Allowing mergers would cut a swathe through employment in the industry. Current estimates are based on the presumption that two of the four banks merging would force the others to do likewise, resulting in a consequent job loss of 35 000 people, often in regional areas.

"Job loss on this scale would be the equivalent of BHP closing down its Newcastle operation more than ten times over. It represents a catastrophe for secure employment, and more bad news for customers." says Geoff Derrick, Secretary of the NSW/ACT branch of the Finance Sector Union.

Those who stand to gain most from such mergers are the executives controlling these corporations. While they are already in receipt of multi-million dollar packages - recently departed Westpac chief Bob Joss was receiving $2.4 million last financial year - the bulk of their income comes from share options they are able to exercise, earning literally millions of dollars at a time.

Each has some powerful short-term reasons for advocating big bank mergers. The impact on the value of those share options would be substantial, and executives stand to gain from similar increases just from speculation about mergers.

Despite the pressure, the Government's response has been negative so far. Even Michael Kroger, Liberal Party powerbroker and friend of Peter Costello has been unable to persuade the Government to change its mind. Kroger had been on the payroll of the most predatory of the four banks - the NAB - as it sought a change in policy. Perhaps tellingly, Kroger announced this week that he was moving away from involvement in the political lobbying game.

While the campaign will continue without him, at the moment the Government seems to assess the costs of big bank mergers as being too high.

Secretary, Geoff Derrick says:

"Our research shows that he banks are expected own up to their responsibilities to the community. The FSU has called on both the State and Federal governments to examine the proven ways of enforcing community obligations already in place, such as the Community Re-Investment Act in the United States. "

The US Act rates each bank on its community service in lending, deposits and transaction business. The rating is taken into account when banks have dealings with the government. Statutory deposits are used to fill the gap where services are not present, to ensure access to financial services for all.

As the bank executives' comments signal that the high stakes tussle will continue, many forces, especially technology, are shaping the future of financial services. The outcome of this decision will be critical to deciding whose interests are served - corporate shareholders, or the Australian community.

View entire issue - print all of the articles!

Issue 3 contents

Interview: How Organising Works
The ACTU�s Sarah Kaine is part of a new breed of union organiser who help workers stand up for themselves.

Unions: Big Boys Bank on Mergers
Mergers of the big banks are back on the agenda, and the Finance Sector Union is leading the community campaign against them.

History: Commemorating Our Dear Departed Equal Pay Activists
Two women who deserve special recognition and commemoration as part of our Women's Day celebrations are Eileen Powell and Edna Ryan, both of who played a crucial role in the struggle for equal pay.

Legal: New Judge Announces Zero Tolerance Of Pay Inequity In NSW
The NSW Industrial Relations Commission is training its sights on industrial raw-deals for women, and targeting the traditional under-valuation of women's work.

Review: Keep the Australia in Australian Television.
Local content quotas for Australian television are under threat from our Kiwi cousins.

Campaign Diary: Radical Conservatives Raise Their Own Bar
This Monday writs are issued for the state election, The phoney campaign ends and the real one begins; and the issue of stability, the need for it and the lack of it, is set to dominate the next four weeks.

» Unions Win Virtual Access To The Workplace

» Shaw To Snip At Gender Pay Gaps

» Living Wage - Round One To Unions

» Workers Fight Hotel Chain's Contracts Push

» No Picnic, No Pay

» The Modern Day Tales Of Robin Hood

» Nothing Casual About Woolies Drivers

» Unionists Flex Muscles for a Gay Time