Banks’ failure to pass on rate cuts sparks ACCC inquiry
The federal government will today announce an ACCC investigation into the big four banks, accusing them of profiteering after they failed to pass on interest rate cuts to their customers in full.
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The Federal Government will once again go after the banking industry, calling in the ACCC to investigate profiteering after the four big banks failed to pass on this month’s official interest rate cut in full.
Treasurer Josh Frydenberg will today announce the inquiry, which will look at the cost of residential mortgages, and how it can be made easier for customers to switch to banks with better rates.
The inquiry will also look at the so-called “loyalty tax’’ which sees existing customers slugged more for their home loans than new customers.
The second inquiry into the conduct of the banks comes just nine months after the conclusion of the royal commission into banking misconduct, and appears to have been triggered by the refusal of the four big banks — Westpac, ANZ, NAB and the CBA — to pass on the full interest rate cut handed down by the Reserve Bank early this month.
The move, which saw Prime Minister Scott Morrison accuse the banks of “profiteering’’, pumped millions of dollars into the banks’ coffers, and deprived mortgage holders of hundreds of dollars a year in savings.
The Australian Competition and Consumer Commission will carry out the inquiry, with an interim report due in March and a final report by the end of September.
“The failure of the banks to fully pass on the recent rate cuts to their customers when their cost of funds have come down significantly leaves them exposed to the charge that they are putting their profits before their customers,” Mr Frydenberg said.
“This is not a good outcome for either their customers or the economy as a whole, and comes just months after the Royal Commission shone a bright light on misconduct in the banking sector.”
The Government and RBA was hopeful the October rate cut would stimulate spending in the economy and was infuriated when the four big banks, who hold around 75 per cent of Australia’s residential home loans, only passed on about half the cut.
Of the 75 basis points cut by the Reserve Bank this year, the big four have passed on only 57 points.
The banks have argued their profit margins won’t allow them to cut further due to the impact on saver’s returns.
The Government is unconvinced and has directed the ACCC to use its special powers to extract information from the banks, with a view to make it easier for customers to get a better deal.
“With this new inquiry the government is providing the banks with an opportunity to transparently account for their decision making and how they balance the needs of borrowers, savers, shareholders and the wider community,” Mr Frydenberg said.
He said the information obtained would “help inform policy makers as we seek to get customers the best possible deal from their bank.”
JOSH FRYDENBERG: BIG FOUR BANKS PUTTING PROFITS BEFORE PEOPLE
The inquiry will investigate residential mortgage prices charged by the big banks, smaller banks and non-bank lenders, and how decisions are made in response to movements in the official cash rate.
It will also look at the difference in prices paid by new and existing customers — the “loyalty tax’’ which sees existing customers paying more for their loans than new customers lured on cheaper rates.
It will further examine the difference between published interest rates and the rates actually paid, and look at ways to make it easier for mortgage-holders to switch lenders.
The inquiry will focus on the period from January 1 this year, when the Reserve Bank cut rates three times, arguing that the banks should pass on the rate in full.