16 Jun 2009

Cunliffe rejects banks' defence of interest rates

7:59 pm on 16 June 2009

Labour MP David Cunliffe says the banking sector's defence of its interest rates does not stack up.

Banks were criticised at a recent parliamentary finance and expenditure select committee meeting, with MPs saying that the mortgage interest rates people pay have only edged down while the benchmark Official Cash Rate set by the Reserve Bank has plummeted.

On Television New Zealand's Q + A programme on Sunday, BNZ chief executive rejected suggestions that his or any other bank in New Zealand is taking advantage of customers.

Mr Thorburn says banks are paying more to get money now than they did before. He says there is deposit pressure locally and overseas and the average bank profit has fallen 18%. It is important to keep banks profitable, he says, so that New Zealand's banking system can stay strong.

However, Mr Cunliffe, a member of the select committee, told the current affairs programme the stability and strength of the local banking sector could not be used as an excuse for failing to pass on cuts in short-term interest rates.

Later, he told Radio New Zealand that bank profits only look lower due to bad debt. Mr Cunliffe says the select committee could push for a further inquiry into interest rates, which would look deeper into banks' financial records.