fbpx
Skip to main content
Tropical Cyclone Seroja: Emergency Assistance

ABA responds to call for transparency on interest rates

5 August 2016

Sydney, 4 August 2016: The Australian Bankers’ Association today responded to the Federal Government’s invitation for banks to brief a parliamentary committee on interest rate decisions. 

“The Federal Government is entitled to call the banks before a parliamentary committee, however no other businesses are required to justify their commercial pricing decisions in this way,” ABA Chief Executive Steven Münchenberg said.

“We are confident banks can explain why the interest rates they set for borrowers are determined largely by the costs of funds and the pressures of a highly competitive market, not the Reserve Bank cash rate,” he said.

“Since the start of the global financial crisis, over eight years ago, the Reserve Bank’s cash rate has not mirrored the actual funding costs of banks. Banks have explained repeatedly why the Reserve Bank does not set interest rates.”

The ABA has pointed out that one example of higher bank funding costs comes from the recent announcements by a number of banks that they are raising deposit interest rates.

“About two-thirds of bank funding comes from deposits and banks have raised interest rates on a range of those deposits, even as the Reserve Bank cut the cash rate,” Mr Münchenberg said.

“This is great news for the many Australians, in particular seniors, who rely on their savings in retirement and who are being squeezed by low interest rates. At the same time, those Australians with a mortgage continue to enjoy the lowest interest rates in over 50 years,” he said.

“As well as higher deposit costs, we have seen increases in banks’ short-term funding in wholesale markets. Banks are also having to build their capital to withstand any future shocks, which adds further pressure on their margins.

“In making interest rate decisions, banks have to balance the needs of borrowers and savers, and shareholders in banks, most of whom are also ordinary Australians.

“The industry welcomes the opportunity to discuss the international and domestic context for banks, and how we are responding to concerns around bank practices.”

ENDS

Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913

@austbankers

bankers.asn.au

Latest news

1 / 3
Media Releases
Support available for customers affected by Tropical Cyclone Seroja
15 April 2021

Australian banks are ready to help customers in Western Australia who are rebuilding after the destruction inflicted by Tropical Cyclone Seroja. Communities in WA’s mid-west were devastated by the cyclone last week, when it crossed the coast near the town of Kalbarri. Geraldton, Northampton, Binnu, Chapman Valley, Mingenew and a number of other towns were… Read more »

Read more
Media Releases
Banks unite to help customers experiencing financial abuse
4 April 2021

Australian banks are launching updated guidelines on financial abuse as part of their continued focus on responding to family violence and elder abuse.

Read more
Media Releases
Banks call for consistent laws to prevent elder abuse
31 March 2021

Australian banks are urging state and territory governments to adopt consistent laws on powers of attorney to prevent elder financial abuse.

Read more