Big four under microscope over interest rates

BANKS under scrutiny for "telegraphing" interest rate plans before the RBA decision.

The big banks risk being investigated for price collusion if they make their interest rate plans known before RBA decisions/ Picture: Vanessa Hunter

THE competition regulator is believed to be keeping a watch on the major banks after NAB "telegraphed" its pricing intentions on home loans ahead of the RBA decision.

Since revelations last year over potential price co-ordination among petrol retailers, the ACCC has widened its monitoring to other industries.

NAB signalled publicly at the weekend that it would price its variable rate home loan in line with the Reserve Bank's rate decision.

While NAB's up-front commitment was welcomed by borrowers on Monday, the move could have triggered a full-blown ACCC investigation had one of its rivals followed suit.

The Trade Practices Act prohibits the telegraphing of pricing intentions between market rivals.

But, because of loopholes in the wording of key provisions, the ACCC has been hamstrung in the action it can take. In the US, NAB's action would likely have attracted a big legal penalty.

After issuing the price signal, NAB won a few days of positive media coverage at the expense of CBA, Westpac and ANZ.

As it turned out, all the banks followed the RBA by keeping their mortgage rates on hold, but NAB's rivals all ran the risk of being charged with price collusion had they made this known before the RBA announcement.

NAB's behaviour is even more significant in light of it being the price leader in the home loan market among the four major banks. As the price leader, NAB's signals to market rivals are likely to carry more influence in what we are told is a hotly contested sector.