Greedy banks have failed to learn
You’d think that a Royal Commission would have taught the banks a thing or two about checking their greed and arrogance, but apparently it didn’t, so the new inquiry is welcome, writes David Mills.
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Treasurer Josh Frydenberg’s decision to sick the ACCC onto the banking sector so soon after the royal commission is an unexpected but welcome move.
Unexpected, because previously the Liberals were loath to touch the big banks, famously rejecting Labor motions to stage a royal commission 26 times.
The inquiry is something the banks might have anticipated under a Shorten-led Labor government, but not with the Liberals back in power.
The ACCC will investigate the banks’ refusal to pass on the full benefit of three Reserve Bank interest rate cuts to their customers this year.
But the reality is bank intransigence on this issue has been stretching back a decade.
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For years now, successive Treasurers, Prime Ministers and Reserve Bank Governors have urged, warned, cajoled, reminded and basically begged the banks to pass on Reserve Bank interest rates cuts in toto.
They’ve appealed to the top bankers’ sense of the greater good. They’ve also encouraged customers to take their business elsewhere if they’re unhappy with the banks’ decisions.
And all of it has been for nought.
Most of the time, the banks have responded to this wheedling and pleading with the commercial equivalent of an extended middle finger - both to whomsoever was doing the wheedling and pleading, and the public at large.
When the Reserve Bank trimmed the cash rate by 0.25 per cent to 1.25 per cent in June this year, it brought an end to the longest run of consistent interest rates we’ve had since the early 1990s: a total of 31 months during which the cash rate sat at 1.50 per cent.
Shortly after that decision, Governnor Philip Lowe said there had often been “reasonable explanations” why the banks didn’t move in “lock-step” with Reserve Bank decisions in the past, but on this occasion the reduction “should be fully passed through”.
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Two of the big four banks - NAB and CBA - complied, but Westpac and the ANZ refused, with the latter passing on just a miserly 18 basis points across all its loan categories.
Compliance from the big four has been even worse after the July and October rates decisions, when further quarters were trimmed from the cash rate, bringing it to its current historic low of 0.75 per cent.
The big four’s obstreperousness hit new heights after this month’s decision. For owner occupier mortgages, Westpac and NAB dropped their rates by just 15 basis points. ANZ opted for 14. CBA offered just 13: barely half of what the RBA wanted.
The banks defend their refusal to pass on rate cuts on the basis that their margins are being squeezed, but the other strategy that they have been employing over the past few years - delaying the cuts - reveals that there are other factors at play here.
Mr Frydenberg has correctly noted that the banks’ refusal to pass on RBA rate cuts is not a new phenomenon, and traces it back to the Rudd-Gillard-Rudd government, during which time the banks only passed five of 14 rate cuts on to their customers in full.
But it feels as if the banks have been getting bolder, displaying a blazing sense of arrogance that clearly even a Royal Commision couldn’t extinguish.
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One wonders whether the big four banks even considered the possibility of another government inquiry when they were deciding how to respond to the Reserve Bank’s most recent interest rate cut.
The ACCC inquiry will provide a preliminary report by March 30, before a final report on September 30, which means the banks face month after month of negative press and government scrutiny. This will cost them in staff hours, in legal fees and in brand reputation.
Did anybody in the banks’ upper echelons weigh all that up when they were deciding to flout a Reseve Bank rate cut once again? Have they been consciously playing a game of brinkmanship with the government, pushing their interests to the max while just avoiding the sort of scrutiny this inquiry will bring?
Whether they did or not, it’s too late. The straw has broken the camel’s back.
To hell with them and their rapacious greed.
It’s time for the ACCC to jerk their chain.
David Mills is a journalist with News Corp Australia.
Originally published as Greedy banks have failed to learn
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