The central bank has designated the card shemes as "payment systems" and therefore subject to its regulation under the 1998 Payment Systems Act.

The Bank and the consumer watchdog the Australian Competition and Consumer Comission (ACCC) have proposed the big banks cut the A$600 million in annual revenue they collect on credit card service fees.

At the same time, the ACCC has dropped its legal challenge to the setting of fees by the National Australia Bank. NAB executive general manager specialist and emerging businesses, Ross Pinney welcomed the decision, saying it had always been the National's preference to resolve concerns about interchange fees by negotiation rather than through litigation.

"We welcome the ACCC's acknowledgement that commencing proceedings against the National was not an indication that we had acted in any way differently to the other banks in the setting of interchange rates," he says.

The setting of interchange fees and the imposition of membership restrictions by the major card schemes are the subject of ongoing regulatory investigations in other jurisdictions, including the European Union and the US.

The Reserve Bank of Australia says it will establish standards for the setting of interchange fees and a regime for access to the credit card systems which operate "in the public interest". However, the standards will not cover the setting of credit card fees and charges to cardholders and merchants, or interest rates on credit card borrowings.

The so-called 'three party' card schemes, run by American Express and Diners' Club, will not be subjected to the stricter oversight regime since they do not have collectively determined interchange fees, nor access rules that discriminate on the grounds of institutional status, says the Reserve Bank.

The central bank is aiming to have a new regulatory framework in place by the end of 2001.