Australia’s major banks will face regular scrutiny from a parliamentary panel, Prime Minister Malcolm Turnbull said Thursday, amid growing public disquiet about the lenders’ practices.
“This is an important step, a permanent change in the regular financial calendar that will require the banks to become accountable,” Turnbull said in Sydney, as he announced that banking executives will have to appear at least once a year before a committee of lawmakers.
Weakened after last month’s election left his government with a wafer-thin majority in parliament, Turnbull is seeking to stave off demands by the main opposition Labor party for a widespread independent inquiry into the finance industry. Banks have been attacked over mis-advice to wealth customers and were criticized by lawmakers across the political spectrum this week for failing to pass on in full the Reserve Bank of Australia’s latest quarter-point interest rate reduction.
To read more on the banks’ mortgage rate moves, click here.
Shayne Elliott, the chief executive officer of Australia & New Zealand Banking Group Ltd., swiftly responded to Turnbull’s announcement, saying it was a “necessary initiative in the current climate.”
“I welcome the opportunity to represent ANZ’s views and to answer the tough questions that I know will be forthcoming in any parliamentary appearance,” he said in an e-mailed statement.
National Australia Bank Ltd. CEO Andrew Thorburn said in a statement he would accept the Treasurer’s invite to appear before the committee and looked “forward to the dialogue” around how the bank balanced the needs of mortgage customers, depositors and investors.
ANZ Bank, Commonwealth Bank of Australia, Westpac Banking Corp. and National Australia this week trimmed business and home loan costs by less than the central bank’s 25 basis-point move and said they’ll instead offer higher payouts on some term deposits.
Under pressure from regulators to increase stable sources of funding, Australia’s banks are competing to woo depositors. They are also trying to avoid sacrificing earnings, with net interest margins -- a measure of lending profitability -- already at the lowest level in eight years, according to data compiled by Bloomberg.
The major banks will be called to appear before the House of Representatives Standing Committee on Economics and be required to explain matters including the cost of funds, interest rate pricing decisions and risks in the economy.
Labor leader Bill Shorten, who is demanding a Royal Commission into the finance industry, said on Twitter that inviting bank executives to “Canberra for lunch once a year” was a “weak and pathetic response.”
Nick Economou, a Melbourne-based professor at Monash University’s School of Political and Social Inquiry, said Turnbull had been hurt during the election campaign by opposition claims he wasn’t being tough enough on the banks.
“The prime minister is seeking to head off criticism, even though this move looks like he’s hitting the banks with a feather,” Economou said.
Westpac’s CEO Brian Hartzer in an e-mailed statement stressed that banks have to balance the needs of mortgage customers, depositors and shareholders.
“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,” he said. “If that’s the purpose of this announcement, we will be more than happy to appear.”
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