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The banking industry has welcomed the opportunity for the big four banks to appear annually before the House of Representatives Economics Committee, but the Australian Bankers’ Association (ABA) has questioned the need for such reporting.
ABA chief executive Steven Münchenberg said the industry “welcomes the opportunity to discuss the international and domestic context for banks”, but noted that having to validate commercial decisions was not required of other industries.
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“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,” he said.
The big four banks have been called to appear before the House of Representatives Economics Committee on an annual basis, to report on market developments, pricing decisions, and several other key issues, with the committee then reporting to both the Treasurer and Parliament.
The government said in a joint statement from the Treasurer and Prime Minister that “these arrangements will ensure that the banks are regularly, and permanently, accountable to the Committee”, but the ABA noted that interest rate decisions, a core component of these reports, are based on “the costs of funds and the pressures of a highly competitive market, not the Reserve Bank cash rate”.
Mr Münchenberg added that “the Reserve Bank’s cash rate has not mirrored the actual funding costs of banks” since the start of the 2008 financial crisis.
“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.
NAB chief executive Andrew Thorburn said balancing the needs of all stakeholders is a “key responsibility”, and that NAB welcomed the decision.
“We look forward to the dialogue around how we balance these important themes – the delicate balance between different stakeholders; outlining the full cost of being an unquestionably strong bank; and bringing further insight to the topic of how we set our interest rates,” he said.
[Related: Non-banks and brokers face added commissions scrutiny]
