By finance reporter Rebecca Hyam
National Australia Bank’s chairman has used the company’s annual general meeting to defend the bank’s decision to raise lending rates above official increases.
Michael Chaney says the Reserve Bank’s official cash rate is only one factor that influences the cost of borrowings for the banks.
He says the rates associated with term borrowings in wholesale funding markets are substantially higher than they were three years ago.
“The rates we pay for term borrowings in the wholesale markets have risen markedly since the GFC and as our cheaper borrowings expire, they’re being replaced by higher cost borrowings,” he said.
“The third factor driving our funding costs is domestic term deposit rates and of course many in the room here will be enjoying higher deposit rates that have occurred over the last year.”
Mr Chaney says the public criticism of banks for raising their lending rates above the RBA’s official increases is unfair and people need to remember banks are paying higher interest rates on deposits.
“In recent times there’s been quite a lot of public criticism of banks for raising their home lending rates above official rates flagged by the Reserve Bank. Such criticism is unjustified and unfair,” he told shareholders.
“Following the financial crisis, funding costs for all Australian banks have been higher and lending rates have had to rise accordingly.”
He urged the bank’s shareholders to speak up and defend the industry against recent public criticism and also rejected the idea that there is not enough competition in Australia’s banking sector.
“It’s really important that banks’ shareholders who number in the hundreds of thousands are aware of the facts of this matter. They should be the strongest advocates of the bank and of the industry generally,” he said.
“The fundamental premise upon which bank bashing is based – that Australia’s bank sector is insufficiently competitive, and that it’s less competitive than it was before the GFC is false.”
Source: www.abc.net.au
