Brokers warned not to expect banks to follow RBA

by Mackenzie McCarty04 Dec 2012

The Reserve Bank of Australia may cut the cash rate today – but don’t expect other banks to follow, warns ABA chief executive, Steven Münchenberg.

Münchenberg says that, while there’s often speculation regarding individual banks’ pricing decisions on loans and deposits, the ABA isn’t involved in pricing decisions. He says banks make their own choices based on a range of factors.

However, he says the ABA is frequently asked to comment on funding costs across the industry because it’s one of the factors which inevitably influence banks’ pricing decisions.

“The Reserve Bank cash rate has reduced 150 basis points since November last year, but with banks, credit unions and building societies facing real funding cost pressures, not all of that has been passed on. The Reserve Bank calculates that the major banks have cut standard variable home loan rates by an average of 115 base points.”

He says banks have passed on more of the rate cuts to small business lending backed by residential security, reducing the average loan by up to 120 basis points.

“While the Reserve Bank has identified that average funding costs have increased by 50 basis points, banks have only passed on 30-35 basis points to most home and small business owners.”

At the same time, he says, banks have only passed on  roughly half the rate cuts to savers with term deposits.

“The Reserve Bank understands the cash rate is just one component of the true cost of banks’ funding and therefore does not expect banks and other lenders to exactly match every cash rate movement.”


  • by Skeptikal 4/12/2012 11:09:28 AM

    It is t the Brokers the Banks are hurting by not passing pn the cuts it is the public and the economy

  • by sidbroker 4/12/2012 12:52:19 PM

    Mr. Swan abolished exit penalties. Some banks have taken back ground by keeping a slice of each rate cut to boost their bottom line to make up for it. We are all now paying instead of the borrowers who move around. So this begs the question who is actually running this country? Thanks Mr. Swan.

  • by Broker 4/12/2012 12:54:20 PM

    I would be 100% certian that there is not a Broker in the country that would back one of our major banks to do the right think and pass it on in full,and then communicate this to a client....but you never know , the banks may well play the Christmas Spirit game!.. I;e get some positive media for a change and then just shaft their customers next time to make up for their perceived Christmas generosity