5th Feb 2015
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Big banks delay rate cuts
Big banks delay rate cuts

Australia’s two biggest banks, the Commonwealth Bank and Westpac, announced that the rate cut on their mortgage interest rates wouldn’t take effect until 20 February, 17 days after the official Reserve Bank of Australia (RBA) decision. Several smaller banks including HSBC, ING Direct and ME Bank have followed in kind by announcing similar delays in passing on the rate cut. Bank of Queensland, the first bank to announce its move, is waiting until 24 February to pass on the rate cut.

The last two RBA rate cuts saw the Commonwealth Bank pass on the reduction to customers eight days after the official decision in August 2013 and six days in May 2013. Westpac were a little slower on both occasions taking 13 days to pass on the cuts.

A 2012 study published in the Economic Record found that over the past two decades, Australian banks were quicker to pass on rate rises than to pass on rate cuts. Analysis by JPMorgan has found that major Australian banks earn around $2 million for every day that they hold back a rate cut of 0.25 per cent.

Treasurer Joe Hockey yesterday urged the big four banks to pass on the RBA rate cut to all customers "I say again to the Australian banks, pass it on in full now, not just to home owners, but, importantly, small business and credit cards as well,".

Read more at www.smh.com.au
Read more from www.abc.net.au
Read more from www.businessspectator.com.au

Opinion: Profits first, customers last

A large number of Australia’s biggest banks have shown their true colours this week by pushing back the passing on of the rate cuts until 17 days after the RBA decision, in order to gouge extra revenue from customers.

There is no justifiable reason for the banks to withhold the RBA rate cut any longer than the previous two instances, yet, we have seen Australia’s two biggest banks do just that. It’s not a surprise to see the smaller banks follow suite. If you ran a petrol station and your main competitor lifted his price from $1.20 per litre to $1.55 per litre, it would only make sense to follow in turn and increase your own profits by following those around you.

The banking sector is focused on one goal – increasing profits – irrespective of the cost to their customers. When the RBA cuts the official interest rate, as they did this week, the banks are not held to account to pass on these reduced rates, and if they do, they can do it on their own time – such as what we are seeing with the current delay. There is no foreseeable legislative change anytime soon. It seems that for reasonable and enforceable action to be reached, it will take another Global Financial Crisis (GFC). If the banks require federal government support (eg: credit guarantees), such as they did during the last GFC, the government will have the leverage and the ability to apply effective pressure on the banks to do the right thing by their customers.

What do you think? Does the Australian banking sector need a shake up? What should we do about the banks refusal to pass on official rate cuts in a timely manner?





    COMMENTS

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    dstark
    5th Feb 2015
    10:34am
    Banks are required by law to benefit their shareholders.
    Patriot
    5th Feb 2015
    12:23pm
    These laws were passed by YOUR Government.
    STUFF THE PEOPLE.
    TREBOR
    5th Feb 2015
    7:20pm
    Those laws were created in the smoke of the Industrial Revolution to ensure that the five rich people who owned banks would surely benefit.... thus opening the way to any and every bit of chicanery to garner a pound or whatever...
    Wstaton
    5th Feb 2015
    8:09pm
    Notice how LNP went through a lot of old laws and chucked them out. Left this one well alone.
    Patriot
    5th Feb 2015
    8:22pm
    Wstaton
    They just did not dare to disobey their masters!
    Radish
    10th Feb 2015
    3:55pm
    Should we just get rid of all financial institutions? What do people want??
    Patriot
    10th Feb 2015
    4:57pm
    Radish (F)
    NO Nothing wrong with A Finalcial constitution.
    It is the rules they adhere to.
    Money - as required under the Australian Constitution - should be issued into the Australian Economy/Community at no interest.
    Such should be Printed & Generated by the Australian Government rather than BORROWED from the Internationalists AT INTEREST!!!
    That's where the problem is and that's why the world is in a mess.
    tia-maria
    5th Feb 2015
    10:45am
    Our Banks are nothing but a greedy bunch ............. who don't give a dam in hell about their clients what so ever.........Only looking after the top Executive.......and how they keep ripping us off its about dam time they gave back to the clients..........
    Stoker
    5th Feb 2015
    10:55am
    But, but, "we" need the $2mill to pay our 'senior' staff.

    Parasites that's all they are.
    tia-maria
    5th Feb 2015
    11:03am
    Stoker, tuff Bickies they can have biscuits and dunk them in the coffee.......and bring them back down to earth .......
    Patriot
    5th Feb 2015
    12:25pm
    Joe will donate another $8.8 billion to them.
    That's a lot of money less for us pensioners !!!!!
    tia-maria
    5th Feb 2015
    12:29pm
    Patriot that right...But Gee mate we are just number these days us retired pensioners....regardless
    Sceptic
    5th Feb 2015
    2:43pm
    That $8.8 billion is of course the payment to the RBA. But then of course we knew that didn't we.
    Patriot
    5th Feb 2015
    4:34pm
    Sceptic
    In a debate like this, we have to make sure we don't forget.
    The trols never let us forget the BAD DEEDS of the ALP. And rightfully so!
    Radish
    10th Feb 2015
    3:54pm
    The 8.8 billion given to the Reserve Bank is to act as a buffer if there is another financial crisis further down the road according to what I read.
    Wstaton
    5th Feb 2015
    10:52am
    Well waduyaknow,

    Nothing less expected by the greedy banks. Want it both ways, Shoots interest up immediately when it rises, delays it so they can skim off the top when it goes down.
    tia-maria
    5th Feb 2015
    11:21am
    Wstation, banks are one vicious circle mate and the public will always suffer from their greed
    Reeper
    5th Feb 2015
    10:59am
    Banks only care about SHAREHOLDERS, not customers. That is their duty. Holding off a rate decrease for 24 hours, which is what banks do, profits them to sums the average person can't imagine.
    I gave up on banks years ago and use Credit Unions...they are certainly more customer oriented
    wally
    5th Feb 2015
    12:22pm
    And that's the way it is. Any bank boss that lets profits slip gets the chop at the next annual general meeting of shareholders. For them, it is a matter of keeping your job or getting shown the door.
    Having belonged to a credit union for a number of years, I can agree with you completely. I closed my last bank account over twenty years ago and only wish I had done it sooner.
    Patriot
    5th Feb 2015
    4:37pm
    Nobody suggests that the Banks should not make a prifit.
    "Bleeding us Dry" and ship OUR BLOOD to foreign masters is a completely different scenario though.
    Be a lot more pallatable if this BLOD was used for Nation Building (australia) rather than to sopport the GREED of a few banking Cartels.
    Gra
    5th Feb 2015
    7:48pm
    I don't see much difference between my bank and my credit union these days, other than my bank pays a better return on my term deposit.
    Patriot
    5th Feb 2015
    8:08pm
    Gra,
    Credit Unions are just the SLAVES for the banks.
    They do ALL the work and the banks get the major profits
    rookjon
    5th Feb 2015
    10:59am
    Bank "profits" are largely paid to the many wage earner super fund members across Australia or, even before declaration as "profits", feed into the incomes of seniors whose subsistence is often reliant on the size of income stream and fixed deposit investment yields.
    Wstaton
    5th Feb 2015
    11:12am
    Yes rookjon, Fair enough but how much is a fair enough return 10%, 15% how much return do they want when it is in a large effect coming from struggling families and probably other pensioners that can hardly make ends meet.
    Wstaton
    5th Feb 2015
    11:23am
    We should also point out that theses superanuants already get a hefty government bonus on super contributions from government (us the taxpayers) while accumulating this super pile which I point out in the past many of us were not ably to do before it was legislated.

    I have often heard in these forums that people can only blame themselves if they do not provide for their retirement. (Again was very hard in the past and also hard for a great many currently. I find it hard to understand people who say this but are being given a lift by the taxpayers. They are pointed out as heavy lifters why do they need a lift most of the lifting coming from others who are unable to lift because of circumstances.

    Just remember all of us pay tax whether it be income, GST whatever.
    Anonymous
    5th Feb 2015
    11:39am
    I would ask how taxpayers are giving a lift to superannuation . When super is paid by the employers and when it goes into individuals accounts to save for their retirement is taxed . At 15 per cent . Which would seem self defeating in that if balances are not high enough at retirement the taxpayers will have to provide an income.
    The banks do not pay out dividends that are Paricularly high to shareholders . But it is certainly better to hold bank shares than have money on deposit with them .
    The banks do not get all their money to lend from the reserve bank but also from depositors and foreign banks. So the interest rate charged by the reserve only has some impact.And will vary from Bank To Bank .
    rookjon
    5th Feb 2015
    11:49am
    Hi Wstaton, the website:

    http://www.australiancentre.com.au/banking-profitability-bank-capital-and-competition

    concedes that Australian Banks have a small degree of excess return (at 15%) on capital employed, but if other offsets are factored in, earn a similar % to the general stock market average.
    Patriot
    5th Feb 2015
    8:25pm
    Just like the Fed in the USA refuses an external - indeoendent audit of its books, I have my doubts that the RBA gets audited by an independent party.
    So, if this is so, how can you expect that the books really reflect reality?
    I ASK THE QUESTIONS - hAVE THE BOOKS EVER BEEN AUDITED BY AN INDEPENDENT PARTY?
    KSS
    5th Feb 2015
    12:24pm
    Why is this even news? This delay is the norm for the banks. The most newsworthy thing is that they have made their announcement in the same week as the RBA moved the cash rate. In recent times the banks divorced themselves from the monthly ritual of the RBA first Tuesday and did not meet until up to 2 weeks later. Even then there was no guarantee they would pass on all or any of the cut. There was a time there when they even increased the rate despite the RBA. So the fact they have already announced when they will make the change is the only 'surprising' thing.

    Like all businesses, banks are there to make money for their shareholders and clearly they are very successful to the tune of billions. And most working Australians would benefit to some extent through their superfund share holdings.

    So how to maximise your benefit? Well short of buying bank shares directly, get smart over how you do your banking. Knowing how your bank charges fees means you can avoid them altogether. That way they make nothing from you but you can benefit from interest paid to you. Pay credit cards in full every month - no exceptions. If you can't do that you are quite simply living beyond your means. Eventually it has to be paid back and it will cost you more. I have even complained about fees for services that you are forced to use e.g. transferring large sums of money, because they do not offer a DIY alternative and had the fee waived.

    Everyone needs to take responsibility for their own financial activities. Forget brand loyalty and take your business elsewhere for a better deal.
    Anonymous
    5th Feb 2015
    6:18pm
    You would think that as this site is for seniors their might be some accumalted wisdom among the 140,000 receivers .
    But it would appear that the extreme bias to the left as proposed by the editorials only attracts the looney left in comments .
    The silent majority lives on ...
    Patriot
    5th Feb 2015
    6:54pm
    Hi God sorry, Pete I should say,
    Well you might as well be God because:
    1 You know - and I'd say you're very lonely on this site - that we are ALL wrong
    2 You claim that the editorial is biased whilst we know that it just presents the facts as outlined in the (biased your way) media
    3 We're all Looney - Just because we have opposing views to you
    4 You KNOW that the other 140,000 minus 25 or so would all disagree with us and that is why they have not commented

    Man, You MUST be God because you seem to reflect the Collective Wisdom we are so totally lacking, have ESP and are a Para-Psychologist as you can assess all this without knowing us and from a great distance.

    You are also a BL**DY Arrogant BULLY to attempt to make us believe that you have "All the Answers" and engage in the "Name Calling" you do!. Your attitude STINKS!
    Whilst there are a lot of - to some - unpallatable facts aired in this site, you have not (and probably do not intent to) lower yourself to disprove any of them! So - often - this is the reality encountered with individuals like your self.
    Just "Rant & Rave" like many who cannot disprove issues but like to divert the attention from them.

    All I can say to you: "Just leave us alone if we disgust you so much and collect your rewards from the Party Stooges" who employ you.
    Just remember, in the end that, "There is no honour amonst thiefs".
    Anonymous
    5th Feb 2015
    10:36pm
    Thieves
    Anonymous
    5th Feb 2015
    10:38pm
    I am afraid I will have to report you to those who pay me , as having UnAustralian attitudes .
    Patriot
    5th Feb 2015
    10:44pm
    I'm shaking in my boots
    Troubadour
    5th Feb 2015
    12:33pm
    As ever, QUICK to make the move when it is in their favour a rate RISE - BUT much SLOWER when it is a rate CUT. Nothing changes. It would be lovely to see for a change that they
    put the customer first.
    Wstaton
    5th Feb 2015
    1:09pm
    After all if they didn't have customers where would they be.
    Polly Esther
    5th Feb 2015
    12:37pm
    I threatened my bank a few years ago, I told them if they didn't do the right thing by me I'd close my account and go elsewhere never to return. You know what, they jumped to attention, handed me $37 and said "Sir, that's the amount in your account that was, there is the door and never come back". Well that worked, now I keep my money at home in the er um oh my god I've forgotten.
    Patriot
    5th Feb 2015
    12:56pm
    Damn Willie,
    Have some Coconut Oil to drive away the alzheimers and don't forget to tell us.
    GOOD Idea though, at least you won't "Bail ou the Banks" when the time comes (soon).
    Patriot
    5th Feb 2015
    12:41pm
    Future Bank Bailouts

    The included link reveals a matter which was not reported on in the media (I believe) but it assures that WE, the paxpayer, will be ready to BailOut the banks at the nexe financial cricis !!!

    May be "Money under the bed" is not such a bad idea.

    https://www.facebook.com/TheOccupyBrisbane/posts/652753408166962

    In my opinion this isnot just a commercial reality like delaying to pass on their savings.
    IT IS BLANANT THEFT - OBVIOUSLY IS APPROVED BY THE CRIMINALS IN CANBERRA.
    Patriot
    5th Feb 2015
    12:54pm
    KSS,
    The only difference between them is the clothes they wear.
    Then again, after hours, after a few beers & in the dark, they might ALL share the same SACK.
    The SHADOW GOVERNMENT never stops!!!!!

    Indeed KSS,

    THEY ARE ALL CRIMINALS because if there were any good ones amongst them the would report what is really going on.
    And, just in case they don't have the B*lls to do that, the should show some level of integrity & resign.
    TREBOR
    5th Feb 2015
    7:19pm
    It's always a question of profit before people....... on the false premise that there will be a significant flowdown to the general economy, that according to some mathematics Made In Valhalla, will benefit all.....

    http://38.media.tumblr.com/5dfb999c0d41403b718eca29a98793fd/tumblr_ndm5fp2TKt1r5kl7zo1_400.gif
    Gra
    5th Feb 2015
    7:44pm
    Perhaps they are holding off cutting their interest rates for home buyers so they can hold cutting interest rates they pay to us oldies for our savings.
    parco
    5th Feb 2015
    7:50pm
    Does any of this really come as a surprise?
    Maybe its time we exercised our collective voice to do something about this bunch of bandits.
    Problem is how to do this so it's really heard and has some impact.
    Drew and Staff; how about offering some advice and information on what avenues can be used that might have some chance of making a difference
    Patriot
    5th Feb 2015
    8:21pm
    Parco
    http://www.simonsaysbiz.com/app/download/8605803483/your_will_be_done.pdf?t=1421819559

    The above link will download a booklet that provides all mechanics necessary to start taking action against these crims. "Your Will be done - Arthur Chresby"
    Arthur was the "well Respected member (Lockyer) of (I believe) the Federal Senate for many years. He unfortunately is no longer with us to share his wisdom.
    He indicates clear avenues how you should approach your member of parliament and inform him what you feel should be done.
    He also gives info on how to circumnavigate the Preferential Voting Debackle.

    Great to see somebody getting angry enough to decide to do something!

    The following website has many delectable gooddies: http://www.simonsaysbiz.com/downloads/

    Give me a hoy to let me know what you think please.
    FrankC
    6th Feb 2015
    4:19pm
    Oh yes please, get rid of this criminal "preferential voting system". When I went to the polling station, there were signs all over the place, saying 'Don't forget to mark all the boxes', to which there would be no vote from me, but when I got inside, I found you only need mark a '1' in one box only. Preferences should be scrapped, totally!! They are totally unfair.
    Patriot
    6th Feb 2015
    5:44pm
    FrankC
    http://www.simonsaysbiz.com/app/download/8605803483/your_will_be_done.pdf?t=1421819559
    The above download "Sets Out" how to legally get around Preferential voting and have your vote allocated the way you want to!
    Rose
    5th Feb 2015
    9:30pm
    Banks have always profited from Australian Government Pensions & Allowances. Pension & Allowances are paid by Centrelink on the fortnight end date which for Pensions is 2 days before the payments are released to customers by the bank & for Allowances like Newstart it is 1 day. One can only imagine the profits banking institutions are making by holding these payments. I have never understood why this racquet seems to be considered acceptable.
    Pamiea
    5th Feb 2015
    10:44pm
    Write to your bank and encourage as many people as possible to do this as people power talks. Get a group organized with banners outside banks to point out what they are doing.
    Adrianus
    6th Feb 2015
    12:52pm
    I would dispute that bland statement that "JPMorgan has found that major Australian banks earn around $2 million for every day that they hold back a rate cut of 0.25 per cent."
    Australians have housing debt alone of $1.4 trillion. Therefore a drop in the borrowing rate of .25% would amount to around $9.8 million per day in lost revenue for all home lenders. Of course that is simply housing debt, total private debt would be about twice that I would imagine. A revenue loss of only $2m per day would account for lending of only $292b. I cannot imagine the balance of that much debt being outstanding on fixed rate terms during the economic climate we have been experiencing for the past few years?
    It does seem a little harsh to wish for a GFC out of a determination to make the banks heal with reasonable and enforceable action?
    What purpose would it really serve? Bank bashing has become like Climate Warming/Changing, all too political for most of us to know what's really going on.
    By the way, talk about insider trading! The market factored in the cash rate drop a week before the event. Who knew what and how did they know?
    FrankC
    6th Feb 2015
    4:10pm
    And the banks forget that it is their customers who are providing with jobs and the cash flow. They're all still greedy bastards. This is something Anastacia can do, pass a law making all banks pass on rate cuts as fast as they pass on rate increases, no ifs or buts. Remind them AP that our banks are the most profitable in the world,(---what a surprise !!!! ) made possible by customers to whom they don't give a s..t. The next time I am near to my bank ,BOQ, I shall point bout their little advertising phrase : "Is it possible to love a bank ?' I shall remind them that withholding the rate cut , the answer is 'NO'


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