April 04, 2009

The banking industry has hit back at criticism that it's holding on to interest rate cuts to push up profits at the expense of mortgage holders.The Australian Banking Association (ABA) has argued that its members should be permitted to boost pricing of loans and pocket portions of the interest rate cuts because they provide stability to the financial system."The current debate over bank interest margins and bank funding costs is missing much needed balance and accuracy," ABA said in a statement.

Earlier this month the Reserve Bank of Australia cut interest rates by 25 basis points, but ANZ Banking Group Ltd, Commonwealth Bank of Australia Ltd and Westpac Banking Corporation Ltd only cut their interest rates by 0.1 per cent, while National Australia Bank Ltd sparked outrage by keeping its rates unchanged.In the wake of the banks' decisions, Treasurer Wayne Swan said they needed a "kick up the bum".But ABA says interest margins remain at historic lows, and while banks in the UK and the US continue to weaken to the detriment of the public, Australian banks remain profitable and supportive of the local economy.