Headlines around Australia last week screamed out about bank closures.

They were triggered by the release of the Australian Prudential Regulation Authority’s annual points of presence data that showed an 11 per cent fall in bank branches nationally in 12 months.

Channel Nine was one of many media outlets that picked up the story, reporting 424 branches had “shut their doors for the final time”.

The problem is APRA never actually said that.

“The latest statistics show a further decline in bank branches in the year to 30 June 2023, with a reduction of 424 branches across Australia (11 per cent), including 122 branches (7 per cent) in regional and remote areas. This continues a trend that has seen branch numbers decline by 34 per cent in regional and remote areas, and 37 per cent overall, since the end of June 2017.”

What unsuspecting media did not pick up on was that among those 424 branches were a number of sites that had been stripped of branch status because they no longer provided the level of service required to be classified as such by law.

The doors are still very much open but they are among the growing number of banks that have no tellers and customers can only get cash from an ATM.

The problem for the banks’ owners though, is that unless a customer can get cash from a teller over the counter, the site (or “point of presence”) cannot legally* be reported as a “branch” in government data.

Instead, it is required to be reported as “other face-to-face”, which is basically an office.

A quick check of this year’s APRA points of presence data found 14 of the 424 branches (10 ANZ and two NAB) that disappeared from the branch lists had not closed, but had instead been downgraded to “other face-to-face”.

We know about these 14 sites in particular because APRA has been aware for more than 12 months that they did not meet the legal definition of a branch but allowed them to be reported as branches anyway in the 2022 data.

At the time, APRA justified its decision by saying “in cases where branches were staffed and offered customers the ability to withdraw or deposit cash using ATMs, APRA considered that those facilities continued to meet its definition of a branch”.

A year later however, these sites have been reclassified as “other face-to-face” in a backflip that leaves APRA in no man’s land in terms of enforcing the legislation.

It’s messy, very messy.

The media coverage of the data release last week only adds to the confusion.

APRA was asked if it should have used the “important notices” mechanism it has to alert users of the points of presence database (ie, journalists) of anything of significance that could have an impact on the interpretation of the results?

There is a precedent for this on the subject of classification changes.

The important notices tab was used last year, for example, to notify users that Rabobank and Hongkong Shanghai Banking Corporation branches had been reclassified as “other face-to-face” after years of misreporting.

Why not do the same for the ANZ and NAB sites this year? (Or any others we still don’t know about?)

APRA says the banks didn’t tell them they had previously made an error of classification.

We did though, in a series of stories published in October last year before the release of the 2022 data.

The information was also sent to APRA and Federal Treasurer Jim Chalmers directly, while the Attorney General Mark Dreyfus had been alerted to concerns over the way APRA had handled changes to Bendigo and Adelaide Bank data in 2021.

Don’t forget that APRA’s main job is the banking regulator.

While APRA never said 424 branches had “closed”, it also never said that they hadn’t.

APRA was given an opportunity to provide a statement for this story clarifying this point, in particular, what factors other than branch closures can contribute to movement in classifications from year to year.

It declined.

APRA was also asked to provide a list of banks sites that had been moved from the 2022 branch lists and into “other face-to-face” in 2023 – so the true number of branch closures could be seen – but said it could not because its database was not set up to identify changes in classifications.

So we are left with what could be described as a bit of a situation.

There is a senate inquiry underway that will, at some point, be asking the government agency that was tasked with the job of keeping track of bank closures by the first inquiry into the issue more than 20 years ago how many banks have closed in regional Australia in the past 12 months.

The only honest answer APRA can give is that it doesn’t know.

* Financial Sector (Collection of Data) Act 2001

This article appeared on The Regional on 27 October 2023.

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