Australian Treasurer Wayne Swan vowed to crack down on “arrogant” banks in an extraordinary attack yesterday as major lenders face mounting anger over rising interest rates and fees.
Swan promised sweeping reforms to loosen the grip of Australia’s “big four” lenders, slamming a move by Commonwealth Bank of Australia to lift borrowing rates above Tuesday’s official 25-basis-point rise.
“The behavior of the Commonwealth Bank has been arrogant in the extreme,” Swan told reporters as he left on a trip to China.
“They have moved in defiance of the analysis of the Reserve Bank [Australia’s central bank], which says that their debt interest margins have returned to pre--crisis levels,” Swan added.
The comments follow simmering discontent over Australia’s comparatively high lending rates, which are set to rise further after the Reserve Bank of Australia moved the official cash rate to up to 4.75 percent.
Commonwealth Bank responded by putting its rates up 45 basis points, in a move which Swan called a “cynical cash grab.”
The other big banks have yet to announce rate hikes.
Swan said the global financial crisis had significantly consolidated Australia’s banking sector, killing off smaller lenders and putting too much power in the hands of the now “highly profitable” four major banks.
He said reforms would be announced next month to boost regulatory powers and give consumers more freedom and choice, warning the banks not to “underestimate for one moment” how serious he was about shaking up the sector.
“The fact is Australian banks are highly profitable and their net interest margins have returned to levels they were prior to the global financial crisis,” he said.
Australia’s banks were credited with helping the country stave off recession during the crisis after they eschewed risky lending and investment practices seen in the US and Europe.
However, a series of seven rate hikes since October last year has hit home-owners, while thousands of customers are expected to join a potential multi-billion Australian dollar class action suit against a swathe of unpopular minor banking fees.
“The government is putting in place further reforms to keep the big banks honest because clearly they have behaved in an arrogant fashion and clearly what we will do is make the system more competitive,” Swan said. “I think consumers should have a good hard look at their bank and have a look around to see where there may be better options ... I think it pays for customers to think about going to another bank.”
Swan’s statement follows calls from shadow treasurer Joe Hockey to regulate banks’ interest rate rises, calls that were mocked by the government and reportedly criticized by his own party.
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