‘Big Four’ in fresh attack on new tax

SYDNEY: Australia’s four biggest lenders yesterday launched a strongly worded attack on the government’s new levy on big banks, estimating nearly A$1 billion (US$745.00 million) in additional annual costs between them.

Banks have opposed the tax announced in the federal budget on May 8, with Commonwealth Bank of Australia (CBA), Westpac Banking Corp, National Australia Bank Ltd (NAB) and Australia and New Zealand Banking Group Ltd (ANZ) now putting a number on costs they say will be borne by customers and shareholders.

On an annualised basis, the 0.06% levy on deposits would cost about A$220 million after tax for CBA, versus A$260 million per year estimated by Westpac, A$245 million by NAB and A$240 million by ANZ, the banks said in separate statements yesterday.

CBA said it had expressed serious concerns that the levy was a poorly designed policy which would impact not just the banks, but its customers and shareholders. Westpac said the tax was “inefficient,” while NAB said the tax could not be absorbed and could affect profitability. ANZ said the tax could affect its ability to maintain dividend payments at current levels.

Treasurer Scott Morrison did not immediately respond to a request for comment. On May 14 he told reporters the tax “reflects the way major banks are treated all around the world” and said it would level the playing field for small lenders who did not benefit from implicit government guarantees.

“We think this is absolutely something that the banks should absorb, must absorb or, frankly, they’re treating their customers like mugs,” he said.

The tax will apply to Australia’s five biggest banks from July 1. The government said it would deliver A$6.2 billion over the next four years as part of revenue-raising measures designed to bring the federal budget into surplus by 2020-2021.

Australia’s so-called Big Four banks are very well capitalised and extremely profitable.

The tax will also apply to Macquarie Group Ltd, Australia’s biggest investment bank.

Industry players and analysts say the tax could encourage banks to change their funding strategy such as beefing up securitisation as a way to minimise the overall cost.

Pooled or securitised debt can be taken off bank balance sheets and funded in the capital market.

With about A$180 billion of combined annual funding, the top four Australian banks and Macquarie securitise only a fraction of their debt — between zero and 10%.