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 week’s 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.
“It’s 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 bank’s chief executives.
But Mr Shorten called Mr Turnbull’s “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. I’ll 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 inquiry’s 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”.
‘THEY ARE MAKING ENORMOUS PROFITS’
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 that’s 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.
“It’s 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 can’t.
“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.