Decision time on deposit guarantee
Banks are expected to announce details of how they will pass on the government's deposit guarantee fees for retail deposits over one million dollars in the next few days.
The fees will come into force from next Friday, 28 November.
Over the last few days banks have been receiving replies to scores of detailed questions regarding the guarantee submitted to Treasury three weeks ago.
One bank executive told The Sheet yesterday that they were only now beginning to work out how they would structure their retail fees, because they have been waiting for a response from Treasury.
The tight timetable is problematic for almost all institutions since there is little time left to modify systems to cater to the idiosyncracies of the deposit guarantee.
A number of announcements are expected today and tomorrow.
Commonwealth Bank is rumoured to be preparing a new savings account product but a Commbank spokesman yesterday said he knew nothing about it.
It was reported in the Herald Sun on Saturday that Westpac and NAB have been advising high net worth investors that they can avoid the fee and retain all their money at the one institution by splitting their funds into separate deposits under different names.
That could be viable for couples splitting out of joint accounts, but there are tax implications associated with moving money between personal tax file numbers and ABNs/companies, said Tony Scott, director of Secure Investments FIB.
Scott, who runs www.termdeposits.com.au, said bank execs have been ringing him asking for information on what their competitors are doing.
"It could be quite confusing because each bank and ADI looks like they might be tackling it differently.
"Basically we are hearing that most of the banks will make the fees optional by giving the investor a chance to opt in to the guarantee if they want," said Scott yesterday.
"So a depositor with two million will get the guarantee on the first million. On the second million it will be up to them to opt in and request the guarantee if they want that."
Scott said the major banks are talking about absorbing the fees completely with the second tiers looking to remain competitive by absorbing at least part of the fee.
"Some of the second tiers are talking about absorbing at least part of the fee to bring them to parity with the 70 basis points the majors will be wearing.
"I expect the triple B's and the other ADI's will build the fee into their rate - say seven per cent for the first million and funds over that that are not guaranteed, six if you want the guarantee."
Abacus says it has concerns over using the opinions of international ratings agencies to establish the tiers for the fees.
"All regulated banking institutions - Australian banks, building societies and credit unions - meet the same regulatory requirements under APRA," said Louise Petschler, CEO of Abacus, in a statement.
"In our view, regulation by APRA offers far better protection than the now frequently criticised international debt rating agencies.
"Those ratings are not relevant for most mutual banking institutions as we do not need to raise debt funding in wholesale markets," said Petschler.
"It's ironic that the safe, mutual part of the banking system, which is not exposed to wholesale market turmoil, looks likely to be charged more than those who are in these markets."