Commonwealth Bank, Westpac and ANZ warn Federal Government against tax on deposits

Updated

Three of Australia's big banks are warning against a tax on deposits, with one saying it could pass any costs associated with administering the tax on to consumers.

The ABC understands the Federal Government will introduce a levy on bank deposits in the May budget.

A 0.05 per cent charge would aim to raise $500 million a year to help fund the Government's savings guarantee, which would protect consumers if a bank collapsed.

But the Commonwealth Bank (CBA) has warned any new levy could be passed on to customers.

The move "would impose an ongoing cost on industry, which may be passed on to consumers through higher fees or lower interest rates for deposit accounts", the Commonwealth Bank said in a submission to Treasury on the financial system inquiry.

The CBA is backing the current model, which could see a charge levied on banks after any collapse.

"Commonwealth Bank believes that it appropriately balances the stability objectives of the [financial claims scheme] while not unnecessarily adding to the cost of funding of the Australian banks," it said.

Westpac said a levy would be an ongoing cost and could raise other risks.

"No compelling case has been made to move [to the new model]", the bank's submission reads.

"[The current] funding structure adequately protects deposits in Australia.

"In the event of a bank failure, is it likely that wholesale debt financiers will be most at risk of loss."

The ANZ also said the current savings guarantee system should stay.

Treasurer Joe Hockey said he was considering the idea.

"We are in the process of discussing it with key stakeholders," Mr Hockey said.

"We are consulting widely on it. We'll have more to say about that in the future."

The financial system inquiry final report rejected a deposit levy.

The idea of a bank deposit tax was raised by Labor in 2013 and criticised by Tony Abbott at the time.

Topics: government-and-politics, federal-government, business-economics-and-finance, industry, banking, australia

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