ALBURY Council has gone on the attack about changes to financial investment guidelines which place Hume Bank and WAW at a major disadvantage to big banks.
The council has been blindsided by a move from NSW Treasury Corporation (TCorp) which has been described as “bullying” by one councillor and prompted an approach to the Australian Competition and Consumer Commission whether changes were legal.
Councils can borrow from TCorp at highly competitive interest rate levels, but risk specialists have developed exposure limits to guard against the fallout of a financial downturn such as another Global Financial Crisis.
The council has already been instructed to reduce its investment exposure to WAW down by $2.75 million to $2.21 million and not increase its investment exposure to the Hume Bank above the present balance of $4.01 million.
Also, if further loans are sought, TCorp wants council over time to reduce its exposure to the two local financial institutions down to the government guarantee of $250,000 which would open the door to the big banks to fill the void.
Council has a long-standing history of investing with Hume Bank and WAW and deposits have remained secure even during the GFC.
The TCorp moves were slammed by mayor Kevin Mack.
“(Hume Bank and WAW) are the ones who take the risk and provide services to our smaller towns and hamlets all at the same time,” he said.
“The crux of this issue is the current policy of TCorp is reflective of policy on the run by government.”
Cr Henk van de Ven also went on the offensive.
“The issues here are around a government organisation bullying people to comply with their new regulations,” he said.
“It requires a backlash from us.”
The council has decided to maintain its level of investments with WAW and Hume Bank while further information is sought from the NSW Government.
The ACCC action was added to the council resolution.
WAW chief executive Michael Mack said it had written to TCorp to understand more clearly its motives in making the changes.
“Any policy that severely limits a council’s ability to invest in local banking organisations is a bad policy in our view,” he said.
“It prevents that money being distributed through the local region.
“A policy like this does nothing to further competition.
“It is a free kick for the major banks.”
Member for Albury Greg Aplin’s office and Hume Bank were also approached for comment.
The option of not sourcing loans from TCorp would be at a financial disadvantage for ratepayers.
Based on its forward loan program, borrowing costs would increase by $200,000 per year over the next decade if other lending options were explored.
The council’s present investment balances with Hume Bank and WAW of $4 million and $5 million represent around 0.4 per cent and 1.2 per cent of their respective total customer deposits.
- Receive our daily newsletter straight to your inbox each morning from The Border Mail. Sign up here