PM Announces Banks To Be Questioned By Parliamentary Committee
Monday 8 August 2016 @ 11.17 a.m. | Corporate & Regulatory | Trade & Commerce
Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have announced in a joint press release that Australia’s major banks will be called to appear before the House of Representatives Standing Committee on Economics at least once a year. The Committee will be asked by the Treasurer to examine and report to Parliament on the banking and financial system, with banks called separately to appear and ‘explain how they are responding to funding issues to support Australian consumers and businesses.
Background to the Issue
The press release says:
“The Government recognises that at all times and particularly in challenging economic times globally, it is important that Australians retain faith in our financial institutions and the decisions they are taking. The Australian economy depends critically on the performance and strength of our banking and financial system. Banks operate under a social licence and have responsibilities to the Australian public.”
Treasurer Scott Morrison told The Guardian Australia that the Government needed to increase transparency, following the banks’ failure to pass on the recent interest rate cut from the Reserve Bank:
“Clearly the intention of the Reserve Bank by cutting the rates was to see it pass through and follow through into the broader economy so obviously the extent to which that is not achieved actually frustrates the intention of the bank in making that decision and this is why we are frustrated.”
The announcement comes as there have been increasing calls from Opposition Leader Bill Shorten to hold a royal commission into the banking industry. Mr Turnbull told ABC News that the plan would “drive some cultural change” by “creating a regular and permanent method of accountability and transparency for the banks”, which would make it more effective than a royal commission as it would be an on-going operation.
However, Mr Shorten rejected the claim, saying to The Guardian Australia:
“There is nothing Mr Turnbull won’t do to protect the big banks from a Royal Commission… After giving them a $7bn tax cut, he’s now inviting them to lunch in Canberra once a year so he can wag his finger at them. This is a friendly catch-up, not an investigation.”
Executives from the major banks have agreed to appear before the Committee, with Westpac chief executive Brian Hartzer telling ABC News:
“it's important that the public understand the work that the Government, regulators and banks have done to make our banking system more secure, and the costs of doing that”.
Chief executive of the Australian Bankers’ Association Steven Munchenberg told media organisations that “no other businesses are required to justify their commercial pricing decisions this way”. He told ABC News that:
“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.”
Questions Asked
According to the press release, the banks could be asked to explain:
- International economic and financial market developments and how these are affecting Australia
- Developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian banks
- The costs of funds, impacts on margins and the basis for bank interest rate pricing decisions
- How individual banks and the banking industry as a whole is responding to issues previously raised in Parliamentary inquiries through their package of reforms announced in April 2016
- Bank perspectives on the performance of the Australian economy, including strengths and risks
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