Yahoo Finance Treasurer's desperate plea to Aussie banks in fight with China: 'One of our biggest challenges'
Jim Chalmers is calling on the biggest banks to keep a presence in the Pacific region.
Jim Chalmers is calling on Australia's biggest banks not to reduce branches in the Pacific region over fears it could give China more room to move in. A two-day Pacific Banking Forum is underway to investigate how Aussie services can continue in Pacific Island countries, especially in the age of rising digital payments.
China's state-run banking system has already established a presence in Papua New Guinea's capital, Port Moresby, and there are concerns that could grow if Australian banks continue to close down operations. The Treasurer said an ongoing Aussie presence in the region is "vital" for "safety, security and economic development".
“We have a strong connection with our brothers and sisters in the Pacific and we want to help them prosper into the future and that’s the focus of the Pacific Banking Forum,” he said.
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“We’re bringing world leaders to Brisbane to address one of the biggest challenges facing our closest neighbours and friends. This is about making our part of the world as stable and prosperous as possible.”
The leaders of several Pacific nations, US Treasury officials, senior banking representatives and global financial institutions have been invited to the forum.
Chalmers said Australia wants all Pacific countries to have access to "safe, secure and stable banking" and added it's one of Australia's "highest priorities" for the region.
“You can bank on Australia to work with you to keep the Pacific connected to the global financial system," he said.
Australia vs China in the Pacific region
Adelaide Bank announced it would be withdrawing from Nauru, which uses the Australian dollar as its currency, by December this year.
The tiny island country in Micronesia decided to sign a Memorandum of Understanding with the Bank of China to ensure its banking system would remain operational.
Earlier this year, Bendigo Bank announced it would delay its withdrawal from Nauru until mid-next year after previously saying it would exit by the end of 2024.
There are fears China could convince the island to switch from using the Aussie dollar to China's official currency, the renminbi.
ANZ boss Shayne Elliott said it's difficult to keep branches open in the Pacific when the bank has to abide by a foreign country's "own laws, regulations, customs and tax".
“High-cost and high-risk countries that don’t offer scale have become less attractive for banks to serve,” he said.
“While the Pacific is not unique in facing this challenge, it is an area that is badly affected by it.”
ANZ has the largest reach in the region compared to any other Aussie bank and it has closed 10 branches in the last five years.
Chalmers has been communicating with Australia's biggest banks "to let them know how important a continued Australian banking presence in the region is to the government".
Funding boost to keep an Aussie presence in the Pacific region
He's expected to announce a $6.3 million initiative today to incentivise Australian banks to resist winding down operations in the Pacific.
Nearly $3 million will be sent to the World Bank to help develop a secure digital identity infrastructure.
The rest of the cash will be used to boost compliance on anti-money laundering and counter-terrorism fronts, as well as helping criminal justice law enforcement efforts.
Part of a wider problem on home soil
Multiple institutions have been shutting branches in regional and rural areas of Australia.
A Senate committee inquiry found nearly 800 locations had closed in non-metropolitan areas between June 2017 and June 2023.
"It is clear that the current model of banking industry self-regulation has failed to shelter regional Australia," the committee's report said.
The investigation highlighted how essential a local banking presence is for customers in rural and regional Australia.
"Bank branch closures are devastating to many regional and remote communities," the report added.
"Along with an increased need for cash, regional and remote communities are more dependent on face-to-face services.
"Many have a higher proportion of elderly, Indigenous, and/or disabled populations, and may be particularly exposed by bank branch closures."
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