Friday, May 22, 2009

Banks lapping it up


Interesting to note that even during a fully blown recession, the banks still have the nerve to keep lapping it up.

Bill tops $2m for NAB strategy trip
From the Sydney Morning Herald
Friday 22nd May 2009
Artical by Mark Hawthorne and Eric Johnston

AS MANY as 100 National Australia Bank executives have secretly jetted to San Francisco at shareholders' expense to attend a strategy conference, with the bill expected to top $2 million on airfares and accommodation.

The Melbourne-based bank confirmed that 24 executives were in San Francisco, but disputed claims from senior bank staff that 100 had been sent.

The trip coincides with revelations in a Reserve Bank report that Australia's banks receive $11.6 billion in fees from customers, as well as unprecedented taxpayer support to help deal with the global financial crisis.

According to the report, bank fees have risen $885 million, or 8 per cent over the last year.

The industry has also been criticised in recent months for failing to pass on to home owners the full amount of official interest rate cuts, even after the Government provided a universal deposit guarantee to buttress the banking system.

An NAB spokesman, George Wright, confirmed the training program was taking place, but disputed the number of people involved. "Only 24 are put through the program at a time."

He said 24 executives had finished and a further 24 were about to start. The executives were from NAB's Australian, New Zealand and British operations.

"We have established a senior leaders program which we intend to put a number of senior leaders through over the next four years," Mr Wright said, adding that it was more economical to send the executives to San Francisco than have those involved sent to Australia.

The tailor-made program includes academics from business schools including Harvard and Stanford universities and the London Business School.

This week's trip to the US is the second by NAB executives in just three months. In February, 25 flew to San Francisco to attend a leadership program.

One of the most recent programs included the bank's chief executive, Cameron Clyne, who talked up the benefits of the leadership scheme at a briefing to investors earlier this year.

Mid-ranking executives at NAB's Melbourne headquarters said they were not informed of the San Francisco trip by senior executives. "There's no one around to sign off on anything," one complained. "We only worked out what had happened by Wednesday, when it was evident just about everyone's boss had disappeared. Many are tacking on … annual leave … and won't be back until next month."

Those on the latest trip are said to include the head of nabCapital, Shaun Dooley, and the chief risk officer, Bruce Monro.

The cost of the February event, including accommodation, was hundreds of thousands of dollars. Qantas charges about $14,600 for a return business-class flight to San Francisco. If 100 were attending, as suggested by NAB staff, the latest event could top $2 million on travel and accommodation, without including the cost of the tailored training course and executive expenses.

Staff at the Melbourne HQ say they have been "left holding the bag", and the trip had been kept secret to prevent media leaks. "It's nice for some, but meanwhile the rest of us are taking the calls from angry customers asking why we haven't passed on interest cuts to their credit cards and their mortgages," he said


Banks pick up $1b in penalty fees
From the Sydney Morning Herald
Friday 22nd May 2009
Article by Jacob Saulwick

HOUSEHOLDS paid banks almost $1 billion in late or overdraft fees last year - about $50 for every man, woman and child in the country.

The Reserve Bank has for the first time tallied the "exception fees" charged by banks - the costs attached to making a late credit card payment, overdrawing from a deposit account, or running over a credit limit.

It reveals a $960 million bill accrued by households, the bulk from overdrawing deposit accounts and breaking credit card rules, as well as $200 million in fees from businesses.

For consumer groups, who have spent years agitating for the release of the information, the Reserve's report supported their argument that the level of fees charged by Australian banks is unfair.

Further, the burden is understood to fall disproportionately on lower income earners, who can rapidly rack-up a succession of fees because they do not have the wriggle room in their accounts to avoid penalty charges.

"The reason that it is such a pernicious issue is that the fees are paid primarily by the people that can least afford them," said the director of policy and campaigns at the Consumer Action Law Centre, Nicole Rich.

There are no figures detailing the breakdown of charges on different income groups, but the Senate Economics Committee reported last year "strong anecdotal evidence that in some cases at least the impost of high default fees is marginalising people who are already struggling to feel they belong in Australian society."

A spokesman for Choice, Christopher Zinn, said the exception fee bill was much worse than his expectation of about $250 million.

"We believe that you can have secure and stable banking without a billion dollars a year coming from penalty fees," he said.

Total bank fees actually grew at a slower rate than the size of banks' balance sheets during 2008. Household fees increased by 8 per cent, down from an average growth rate of 11 per cent between 2002 and 2007.

Banks charged households $4.8 billion in fees in 2008.

Of that, credit card fees made up $1.3 billion - up 11 per cent from the previous year, but down from an average growth rate of 23 per cent before that.

For its part, the bankers' lobby noted that customers could find ways of avoiding about 30 per cent of all fees.

"By using your own bank's ATMs, ensuring accounts are not overdrawn and your credit card paid on time, money can be saved," said the chief executive of the Australian Bankers' Association, David Bell.

"Avoiding overdrawn fees can be done by checking your account balances before making large purchases." The majority of major banks have also introduced low or zero fee accounts for low-income earners.

Also yesterday, the Reserve Bank released figures showing households used recent government stimulus payments to carve into their debts. Credit card repayments jumped more than 17 per cent in April, the report showed.

In addition to exception fees, customers paid $640 million for using ATMs that were not from their own bank.


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