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Inquiry claims banks didn't pass on OCR cuts

The Labour, Progressive and Green parties claim banks propped up their profit margins by not passing on cuts to the official cash rate earlier this year and raised questions about the effectiveness of monetary policy.

Wednesday, November 11th 2009, 1:15PM 5 Comments

The Opposition inquiry into the banking sector found the big four Australian banks didn't pass on between 50 and 70 basis points to customers after the central bank embarked on its steepest series of cuts to the country's benchmark interest rate to shore up the economy's financial stability. It questioned the use of manipulating the OCR to manage monetary policy, and pushed for greater powers for the Reserve Bank.  

"It appeared that to some degree the banks have also retained an additional margin on borrowing costs in order to offset other factors reducing their profit levels," though increased costs of borrowing money from offshore absorbed some of this difference, the parliamentarians' report said. "The present monetary policy framework was seen to have serious unintended consequences for the New Zealand economy." 

The inquiry was held after government MPs and their supporters blocked Parliament's Finance and Expenditure Committee from pursuing concerns it raised about the banking sector's response to the recession in June.  

The report called on the government to inject capital into state-owned Kiwibank as a way to "promote more effective competition on bank lending margins and contribute to a greater share of local funding lending."  

Green Party co-leader Russel Norman said the inquiry found New Zealand "does not have a competitive banking sector" and the "lack of competition has cost their customers up to $2 billion of additional interest rate expenses." 

"With four banks controlling 90% of the banking assets here, we have effectively lost control of the lifeblood of our economy," he said in a statement. "The government needs to seriously invest in Kiwibank to bring it up to the point where it can compete effectively with the big four Australian-owned banks." 

The report said tax policy favoured investment in housing and "discriminates against businesses investing to produce goods and services" creating an imbalance of resources in the economy.

Businesswire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

« Mortgage fraud increasesAllied Kiwi says insurance sales up 50% »

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Comments from our readers

On 11 November 2009 at 3:09 pm killers said:
Banks are killers for homeloan borrowers. Certainly, the biggest cake is property (the only big cake), but if banks kill all of borrowers, how banks can do further business? the raise too much excauses, and misleading some people, and get huge margin..... above parties are good! We vote you!
On 12 November 2009 at 8:16 am Ricardo said:
The sooner people realise banks are there to make money and not necessarily do any good for the public, the sooner you will all realise that like lawyers, banks just clip your ticket too on the way through, adding no real value. Governments should lend money to homeowners and use the interest to fund infrastructure projects. At least that way we would all benefit. That would be a real win-win for communities.
On 12 November 2009 at 8:37 am Richard said:
I hope this report did not cost the opposition much as its not worth the paper it was printed on. The fundamental assumption that OCR is representative of a banks cost of funding itself is immensely flawed.

This is pure grandstanding by the opposition parties publishing a report I hope they understand it is completely misleading and inaccurate. At least then they can only be accused of being misadventurous in their stoking of the populous belief as opposed to being completely ignorant and stupid.
On 12 November 2009 at 8:42 am kiding said:
Are you kiding - "Trading bank margins are stable or falling, with fierce competition for term desposits". Too much magin, all banks getting now. Term deposits? only small % from your fund.
On 12 November 2009 at 8:59 am Pete said:
The spelling, grammar and unintelligible comments from "killers" tells you all you need to know about Labour, Progressive and Greens Party voters. Wake up and get real.
Commenting is closed

 

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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