An ANZ exec has claimed a link between the RBA cash rate and bank loan rates is a "myth" that banks let persist out of convenience.
ANZ Australia chief executive Philip Chronican has told an American Chamber of Commerce meeting in Melbourne that the "myth" of a link between the Reserve Bank's monetary policy and bank funding costs only arose in the 1990s, and persisted because of an extended period of stability in financial markets.
"I’ll be frank - the banks let this myth persist because it was convenient for them. It saved having to go into the very complex explanation about what really drove interest rates," Chronican said.
Chronican also refuted the claim that offshore funding costs were driving up bank rates. He claimed competition for deposits was the primary reason funding costs were tightening for Australian banks.
"It is customer deposits – by far the major source of bank funding – that are the driving force behind higher costs in the last few years. As banks look to decrease their reliance on wholesale and debt funding, they need to offer customers greater returns on their deposits to win their business," he said.
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