A potential industrial dispute is brewing between Bendigo and Adelaide Bank and the Finance Sector Union, with the union calling on the regional bank to improve a pay offer to staff. The parties are trying to negotiate a new three year enterprise deal to replace an agreement that was ratified by the Fair Work Commission in December 2015. Bendigo last week tabled an offer to raise salaries for most staff across the bank by 2.5 per cent over a three year period ending in 2021. However, FSU assistant national secretary Nathan Rees last night dismissed the bank's offer as inadequate, saying that Bendigo needed to bring future pay increases in line with the 3 per cent-plus rises negotiated recently with Westpac and promised by other banks. "Bendigo and Adelaide bank have tabled a 2.5 per cent pay increase 'final offer' to hardworking staff," Rees told Banking Day. "Bendigo has consistently claimed it is the fifth biggest bank in Australia; now it needs to put its money where its mouth is by offering a pay rise that has a '3' in front of it, as each of the Big Four have done." Rees invoked the repeated calls for wage rises from RBA Governor Philip Lowe, who told a parliamentary committee in August that private and public sector wages should be increased this year by at least 3 per cent to boost aggregate demand in the economy. "Bendigo and Adelaide Bank ought to heed to encouragement of Reserve Bank Governor Lowe, who has repeatedly called for employers to offer 3 per cent-plus pay rises, in the national interest," said Rees. "The big banks, like Bendigo, have a truckload of work to do restoring community trust; they should start that process by paying their workers a fair and reasonable wage." Historically, Bendigo has delivered slightly higher average pay rises than most of its listed banking peers. Under the 2015 agreement Bendigo provided annual pay rises of 3 per cent. However, managing director Marnie Baker is under pressure to lower the company's cost-to-income ratio below 55 per cent. Bendigo has the highest cost-to-income ratio of ASX-listed banks, except for Macquarie. Baker has already signalled that she wants to reduce distribution costs across Bendigo's operations by retiring some of the banking brands currently used by the group. But her main opportunity for reducing average expenses in the next three years is to play hardball at the bargaining table with the union. Given that the major banks have signalled they will agree to pay rises of at least 3 per cent, such an approach also presents reputational risk for Bendigo. It could also undermine staff morale across a business that relies on relationship banking rather than pricing to secure and retain customers. While the Bendigo collective bargaining process now looms as the most controversial, CBA's might be the most convivial. CBA has acceded to a string of union demands