The introduction of account number portability would impose significant up-front costs on banks and their customers, a
Treasury briefing released last night under the Freedom of Information Act suggests.
The briefing is one of 25 briefings, presentations, emails and, in some cases, bank correspondence lodged with the department over the policy reform proposals of September and October 2010. These led to the release of a package of policy proposals by the Australian Government.
The Treasury briefing on account portability said the Reserve Bank of Australia could use its powers, under the Payments System Act, to compel banks to offer portability, but it would need a public interest rationale. This, Treasury wrote, "would be a very difficult case to make".
On the other hand, one internal email noted that while initial industry estimates suggest the costs are likely to be "extremely high", Treasury needs to research the projections and actual costs incurred as it did when portability of mobile phone numbers was mandated.
In that case, industry costings proved to be "extremely pessimistic", one Treasury office noted.
The RBA is undertaking a study of the issues relating to account number portability. Bernie Fraser, a former governor of the RBA, is leading the study. Fraser is due to report back to the Government by the end of June.
Most banks and industry associations have argued that portability is not only expensive but also unlikely to achieve the stated aim of fostering the switching of transaction accounts, which, the industry says, is common in any event.
Other themes of the documents released under FOI relate to the merit of banning exit fees on home loans, a policy announced in December and now being implemented by way of regulation.
Banning exit fees on home loans could lead to higher interest rates on loans, an increase in other fees and reduce the transparency of other banks' fees, and force consumers who rarely switch home loans to bear higher costs, encouraging an inefficient level of switching of loans, Treasury briefings suggest.
The documents also show that Treasury was working on issues around the merit of promoting mortgage-backed securities with "bullet" repayments, to stir up demand from new investors. This initiative was redundant by the time the policy package was announced, as one vendor of mortgage-backed securities, Commonwealth Bank, adopted the innovation in an RMBS deal in November.