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Banks hit back at calls for a royal commission

THE banking industry has hit back at calls for a royal commission into the sector, saying it would send the wrong message to the world about the stability of Australian financial institutions.

Opposition Leader Bill Shorten has renewed his attack on the big four banks after they failed to pass on this weeks official interest rate cut by the Reserve Bank to its customers in full.

The decision by the banks to hold back the rate cut from hardworking Australians does nothing to help their credibility, Mr Shorten said.

The big four banks ANZ, Commonwealth Bank, National Australia Bank and Westpac have stirred up a political hornets nest by failing to pass on the latest official 0.25 per cent interest rate cut in full, instead making only modest reductions to their standard variable mortgage rates of 0.10 per cent to 0.14 per cent.

Labor has repeatedly called for a royal commission in the wake of a string of financial scandals that have hit thousands of mum and dad investors.

But Australian Bankers Association chief executive Steven Munchenberg said a royal commission was unnecessary because the institutions were already dealing with the issues.

Its better for us to be fixing those problems now than waiting for some drawn out royal commission, he told ABC radio.

Prime Minister Malcolm Turnbull admonished the banks on Wednesday for not passing on the cut, demanding an explanation from the banks chief executives.


But Mr Shorten called Mr Turnbulls lecture to the banks weak and pathetic and said confidence had been eroded in the system.

Mr Turnbull will give the big banks another empty lecture and a tax cut. Ill give the banks a royal commission.

Influential crossbench senator Nick Xenophon believes the big banks would be more likely to pass on the full extent of interest rates cuts if the Murray financial system inquirys recommendations were implemented.

These include dealing with the unfair cost advantage they have over smaller banks by virtue of the way they are treated by ratings agencies.

Right now the four pillars are like a big brick wall when it comes to passing on the full extent of rate cuts to consumers, Senator Xenophon said.

If only the banks were as quick in cutting rates when they go down as they are at increasing them when the cash rate goes up.

He said if the Turnbull government failed to act soon on the recommendations of the FSI he would introduce legislation to level the playing field so regional and co-operative banks had a fighting chance to compete more fairly for the benefit of consumers.


A former Reserve Bank board member backed the need for an inquiry into banks, insisting the quality of financial advice they provide needs to be examined more closely.

Their authority in that area is becoming vastly bigger than it was even a decade ago, and I think thats where we need to get a better idea of what the culture is and how good the performance and practice is, John Edwards, who was economic adviser to former Labor prime minister Paul Keating, told ABC TV.

Independent federal MP Andrew Wilkie said the central bank wanted to kickstart a slowing economy and the banks need to do their part.

Its not like they are scrapping for cash here, they are making enormous profits and should pass (the rate cut) in full, Mr Wilkie told Sky News.

It comes at a time when Labor has been pressing for a royal commission into the banks in the wake of a string of financial scandals.

Shadow treasurer Chris Bowen admits only the prime minister and his cabinet can call a royal commission the parliament cant.

But we can apply continued pressure on the prime minister and treasurer to deal with this issue, Mr Bowen told ABC radio.

The government has repeatedly dismissed the idea of a royal commission.

Liberal frontbencher Simon Birmingham said the Australian Securities and Investments Commission already has the powers of a royal commission that can uncover wrongdoing in our banks and ensure prosecutions occur if needed.

We really should be backing that authority, Senator Birmingham told Sky News.

Boost your savings as term deposit interest rates rise

SAVERS stashing their cash have finally been given a reason to celebrate with the eruption of a term deposit war among financial institutions.

Borrowers have been revelling in the record-low interest rate environment for some time and now savers have finally been given a boost too with banks pushing up fixed rate deposits deals this month.

Following the Reserve Bank of Australias cash rate cut to 1.5 per cent, many lenders including the big four are on the hunt to attract savers to help meet their regulatory requirements.

New analysis from financial comparison website Mozo found term deposit rates have climbed at all of the big four banks.

Mozo spokeswoman Kirsty Lamont says the tide has finally turned for savers who can now enjoy increases to fixed rate deposit deals.

We are definitely seeing a term deposit war and its a turn around for savers who have endured years of sliding returns since the RBA began cutting the cash rate in November 2011,’ she says.

The banks are doing this in response to capital liquidity regulations so they need to have stickier deposit customers who will be on their books for a longer period of time and thats why they are increasing rates.

Their database shows a number of the big four offering rates among the best in the market which is unusual but signals their need to attract more deposits, Lamont says.

About one third of all term deposit providers in Mozos database have increased their one to three-year term deposit rates this month.

John Edginton, the chief executive officer of term deposit marketplace Cashwerkz, says borrowers should be going on the hunt for the best deals possible because rates do vary among institutions.

Sometimes people do tend to stick with the major banks, but some of the second and third tier banks also offer some good interest rates too,’ he says.

Its worthwhile considering all of those banks but if you have money sitting there thats getting less than the current marketplace then look at moving the money into a term deposit.


Banks 1 year 2 year 3 year

ANZ 3% 3.2% 2.25%

CBA 3% 3.1% 3.2%

NAB 2.4% 3.10% 3.20%

Westpac 3% 3.1% 3.2%

Market best 3.11% 3.2% 3.25%

Market average 2.67% 2.73% 2.75%