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.”
Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913
New guidelines to be applied by Australia’s banks to debt collection agencies have been released today, providing a major step up in safeguards to ensure vulnerable customers are protected. The new guidelines outline the process banks must follow before they sell any debt and also what happens once that debt is sold. This includes: Proactively… Read more »
Australians facing financial difficulties as a result of fires raging across New South Wales and Queensland are being encouraged to contact their bank for assistance when they are able to do so. CEO of the Australian Banking Association Anna Bligh said that banks have hardship teams ready to assist customers affected by the fires. … Read more »
On 17 October the ABA and a coalition of eight advocacy organisations held the Parliamentary Launch of the #StopElderFinancialAbuse campaign. The ongoing campaign has been run together with our partners Bauer Media, publisher of well known magazines such as the Australian Women’s Weekly.