fbpx

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 Release
Coronavirus Assistance Available
14 February 2020

Help on offer for small businesses financially affected by coronavirus   Australian small businesses financially impacted by the spread of the coronavirus are being urged to contact their bank to access assistance on offer which can include deferred loan payments, waiving fees and restructuring loans.    Australian Banking Association CEO Anna Bligh said any small business should not tough it out on their own… Read more »

Read more
Media Release
Ian Govey AM to chair Banking Code Compliance Committee
12 February 2020

“The BCCC plays a strategic function in monitoring the effectiveness of the new Banking Code of Practice and shaping good industry practice”

Read more
Media Release
South Australian customers protected by new rule book for banks
7 February 2020

In force since July 1 last year, the new ASIC-approved Banking Code of Practice contains a big step up in protections for customers.

Read more