National Australia Bank Ltd (NAB) chief executive Cameron Clyne says the bank’s decision to abolish penalty and other exception fees on some of its accounts has started to improve the bank’s reputation.

But Mr Clyne said the negative perception of NAB was the result of the bank’s past actions and there was a long way to go to improve its image.

Mr Clyne also said there needed to be debate in Australia about how to become less reliant on offshore funding, something he described as the great weakness of the economy.

“One of the goals I set for myself was improving the reputation of the bank,” Mr Clyne said at an Australia-Israel Chamber of Commerce lunch on Monday.

“The first thing we set out to do was deal with fees.

“Fees are a constant cause of angst.”

NAB abolished overdrawn account fees in September, having announced the move in September, prompting the other banks to cut, or abolish similar fees.

NAB, which is the country’s biggest bank by assets but is smaller in the retail sector, then followed up in October by announcing the abolishment of account service fees on two of its retail transaction accounts and of credit card over-limit and late payment fees.

Mr Clyne said abolishing the overdrawn fee resulted in a 40 per cent reduction in complaints in a month, stopped existing customers from defecting, increased customer satisfaction and caused the number of new customers to jump six-fold.

As part of the Melbourne-based bank’s aim of improving its reputations, it was increasing the number of branches and raising its not-for-profit micro lending activities for the underprivileged.

Mr Clyne said Australia was still vulnerable to shocks from overseas because of its reliance on offshore funding.

“The financial crisis showed us one of the great weak spots of the Australian economy, which is its great reliance on offshore funding,” he said.

“We can think about sensible structural solutions to minimise future shocks, because the only thing I can be certain of is that we’ll have another shock.”

Mr Clyne said ideas such as expanding the local fixed income market, to take advantage of the vast pool of superannuation savings, and adjusting tax rates for deposits and other financial products needed to be debated.

That process had started under the Henry Review of taxation, he said.

AAP