The chief executives of Australia’s ‘Big Four’ banks are set to be questioned over three days this week by a parliamentary committee that could propose measures to limit the dominance of the major lenders, including imposing a new levy.
The CEOs of Commonwealth Bank of Australia (CMWAY), Australia and New Zealand Banking Group (ANZBY), National Australia Bank (NAUBF), and Westpac Banking Corp (WEBNF) will each face three hours of questioning starting on Tuesday by a 10-member panel comprising a diverse group of Australian lawmakers.
The government introduced the annual committee hearings in August after the big banks’ move to not fully pass on interest rate cuts to mortgage customers sparked renewed criticism that they were using their market power to hurt customers.
The Big Four control 80 percent of Australia’s lending market and have posted record profits for years. But they are increasingly coming under fire for alleged abuse of market power following a series of scams involving misleading financial advice, insurance fraud and interest-rate rigging, as well as for refusing to pass on official interest rate cuts in full.
Committee members said the questioning by parliament will focus on bank practices.
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“We will be focusing on unethical practices and raising individual cases with them to demonstrate some of these practices are continuing despite the banks’ claim they have cleaned their act up,” Labor lawmaker and committee member Matt Thistlethwaite told Reuters.
The committee is split between members of the governing coalition, who believe measures including the annual committee hearings are enough to remedy poor bank practices, and opposition politicians who support a more powerful Royal Commission to investigate the banks.
Greens lawmaker and committee member Adam Bandt said the four banks should pay a levy given they use an implied “too big too fail” guarantee they would be bailed out in a crisis by the government to tap international markets for cheaper funding.
“That comes at a cost of their smaller competitors,” Bandt told Reuters.
“One way to increase competition would be to impose a levy on the big banks to offset some of that public support they get.”
One committee member, who declined to be named, said he intended to ask questions on competition and potentially make recommendations that would open the big banks to greater oversight.
DEPOSIT RATES
The banks have attempted to justify their not fully passing on August’s interest rate cut to customers by citing rising funding costs in an uncertain economic environment and regulatory pressure that has forced them to raise deposit rates by as much as 75 basis points. Some of those increased deposit rates have subsequently been unwound.
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Australian Bankers’ Association executive director of retail policy, Diane Tate, said the banks had already introduced various measures to improve customer practices. She said the banks also needed to better explain the decisions they make including mortgage rate changes.
“You can expect the (CEOs) to talk about how they need to get the balance between the interests of their customers, depositors, borrowers and then shareholders who give money to banks but expect a return,” she said.
Representatives of the four major banks declined to comment.
