A Senate committee's final report looking at the impact of bank closures in regional communities says Australians will continue to "pay the price" if regulations are not changed to limit branch closures.
It said private banks have failed regional Australians, and residents will continue to suffer without material change.
Since February 2023 the committee, under the title Bank closures in regional Australia,received more than 600 submissions, held 13 public hearings, and toured regional Australian towns where local branches have closed.
Its final report was handed down on Friday and made eight recommendations to the federal government, urging action to stem the impacts of regional bank closures.
"It is clear that the current model of banking industry self-regulation has failed to shelter regional Australia," the report said.
The committee found banks had "little incentive" to keep branches open.
It found "without regulatory intervention, banks will continue to close branches and communities will pay the price".
Almost 800 branch services have closed in regional areas between June 2017 and June 2023 according to data collected by the Australian Prudential Regulatory Authority.
That number accounts for more than one third of all regional bank branches.
The report from the Senate committee recommended the federal government guarantee "reasonable access to cash and financial services for all Australians".
It also recommended the government investigate the feasibility of a publicly-owned bank and set up a Regional Community Banking Branch Program (RCBBP).
"The objective of the RCBBP would be to help underwrite the establishment of community bank branches providing in-person banking services in regional, rural, and remote Australia," the report said.
"Local communities would be required to raise their own capital as well, but the government contributions could help lower the required amounts."
The committee reaffirmed its view that access to cash was vital to regional communities.
"Consideration could also be given to using this fund to help enhance financial services available at Australia Post," it said.
Face-to-face, cash services vital
The report noted that while cash use was declining across the country, cash and face-to-face banking were still important for many regional communities.
"Bank branch closures are devastating to many regional and remote communities," the committee's report said.
"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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The committee said vulnerable residents and small businesses can be left "high and dry" or forced to drive hundreds of kilometres to the nearest bank.
"As well as disadvantaging individuals living in regional and remote areas, bank branch closures — particularly the closure of a community's last bank — often have a devastating effect on the town's morale," the report said.
"The committee believes Australia's banks are failing to take these impacts seriously.
"In many cases, banks are simply walking away from communities where they have been a mainstay for decades."
In a statement provided to the ABC, the Australian Banking Association criticised the committee's recommendations.
"This report ignores the fact that 98.9 per cent of banking transactions now take place digitally and is driving reductions in branch visits, which have reduced by almost 50 per cent in recent years," the statement said.
The association warned against the idea of a public bank.
"Given the past catastrophic failures of state-owned banks in this country, Australians should be wary of suggestions of a new taxpayer-funded government-owned bank," it said.
"Further, a large government-owned bank would put the ongoing viability of the many small and medium sized banks that serve customers in regional and rural Australia at serious risk."
Pilbara community an example of pressures felt
The idea of a community-managed bank has previously been floated by Western Australia's Shire of Ashburton.
The shire, roughly the size of Bulgaria, has been without a branch since late 2022 and wants to see banking services provided through local government assets.
Committee member Matt Canavan heard stories from residents across the country but said one that stood out came from Tom Price, the largest town in Ashburton shire.
"It's in a major wealth-producing part of the nation, their shire produced two per cent of our nation's annual economic output," he said.
"Their closest bank branch is a 5 or 6 hour drive away across unsealed roads.
"So a lot of small businesses drive an hour to an airport in Paraburdoo and fly to Perth with suitcases full of cash, just to deposit their takings."
The committee travelled to the mining town of Tom Price in the Shire of Ashburton earlier this year and heard from residents about the challenges they faced since Westpac closed in 2022.
"Committee members were moved by challenges faced in [Tom Price] and the lack of support provided by the banking industry," the report said.
"The committee heard that every worker in the Shire of Ashburton produces almost 11 times the Australian average in value."
The resource-rich shire, with a population of around 20,000 people, produces nearly 12 per cent of WA's gross domestic product, largely through iron ore mining.
"This local government area, larger than some countries, has no bank branch," the report said.
Inadequate consultation upon leaving
The Senate report also recommended a code of conduct be developed that would force banks to undertake "meaningful consultation" with communities before a branch is closed.
PilbaraInland Chamber of Commerce and Industry's Sylvia Winkler said she supported the inquiry's recommendations.
"Community-based solutions could actually help remote and regional communities access cash," she said.
"If there are ways to support community-led solutions that's absolutely something that the government should do."
Ms Winkler presented to the Tom Price hearing in March where she shared testimony of how local businesses and community members had suffered.
West Australians were shocked earlier this year when Bankwest made the announcement they would be closing all 60 of their remaining branches, with some set to transition into Commonwealth Bank branches.
Bankwest came under fire by the Senate banking inquiry following the decision, with senators suggesting the bank had not adequately consulted with local communities before announcing the decision.
The report will be tabled in the Senate and presented to the government for consideration.
