Competition Regulator Warns Australian Banks On Signalling Interest Rate Policy
Graeme Samuel, chairman of the Australian Competition & Consumer Commission has issued a stark warning to Australia’s major lender not to signal their interest rate policies to one another, with such behaviour constituting misconduct.
Mr. Samuel said during a radio interview that he was concerned that lenders were signalling their intentions to raise interest rates to each other and the world at large.
“And it’s that sort of price signalling that worries me a bit because what it’s really doing is saying to their competitors, hey guys, if you lift your rates, we’re going to lift them too, so you don’t have to worry about it, and that sort of price signalling really borders on areas that in the US and Europe are potentially, you know, misconduct.” Mr. Samuel said.
On Thursday Ralph Norris, chief executive of CBA said during a speech in Sydney, that rate rises were inevitable as a result of the higher cost of bank funding.
Mr. Norris said that the pressure on bank funding costs were the result of the additional cost of capital, and declined to reveal when CBA intended to pass this additional cost on to its customers.
Mr. Norris’s comments replicate comments made last week by Westpac chief Gail Kelly who said during a business forum that mortgage lending rates would have to rise in order to offset materially higher funding costs.
Mrs. Kelly admitted that the views of the government and the banks on interest rates policy differ substantially.
“We have a particular view of what has occurred with funding costs and I think it is very clear to all of us that funding costs have gone up materially as a direct result of the global financial crisis, and the government has a different view of the extent of it and just how the banks will deal with that situation.” she said.
Last year Westpac was the subject of intense criticism by politicians when it increased its standard variable mortgage rates by 20 basis points in excess of the 25 basis point rate hike undertaken by the central bank.
Mr. Samuel said his main concern was maintaining and encouraging competition within the banking industry, and that price signalling was a worry.
“Well, the banks know our views (on the subject), I’ve said so both publicly and privately.” he said.
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