“No systemic issue” across banking industry

by Miklos Bolza27 Oct 2016
Mike Hirst, managing director of Bendigo and Adelaide Bank, has responded to “community angst” stemming from poor behaviour in the banking sector.
“There can be no hiding the fact that there have been some examples of poor behaviour in the industry,” he said at the bank’s annual general meeting yesterday (26 October).
“These examples have been acknowledged by those organisations who have undertaken them. But, it is apparent from the recent parliamentary hearings that there is no systemic issue across the industry. That is an important point to note.”
While there are certain issues to be addressed, the most effective solution was already in place, Hirst said: “Banks and regulators will work even more closely to deal with the concerns that have been raised, while independently appointed parties will make sure banks are delivering.”
He recommended further regulation to ensure banks continue to operate in the community’s best interests and slammed Labor’s proposed royal commission as “a significant waste of taxpayer and shareholder money”.
Interest rate expectations
Hirst also discussed recent public discussion around bank interest rates and whether they should be set to the Reserve Bank of Australia’s official cash rate.
“There is an expectation in the community that banks should pass on, in full, any rate cut that the Reserve Bank of Australia makes to the official cash rate. As interest rates move lower this is not a realistic expectation for a number of reasons.”
To ease the angst, he offered up the following simplified explanation of why banks price as they do.
“The rate the bank sets must be attractive enough for depositors to provide the funds that are then lent to borrowers. Without those funds there can be no borrowing, so when setting rates banks have to consider lots of stakeholders. We try to do this as equitably as we can.”
There is no direct link between the cash rate and rates on loans and deposits, he added, despite “recent, opportunistic commentary to the contrary”.
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