Australia's big 4 bank CEOs prepare to face the music

Filipino Christian devotees whip their backs bloody. Photo: Dondi Tawatao/Getty Images

The Commonwealth’s Ian Narev will be the first of the big four bank CEOs to front up before a parliamentary committee to explain a few uncomfortable decisions.

Each bank boss has about three hours before the House of Representatives economics committee, starting at 2pm today and running until Thursday.

At the head of the questioning will be the reason prime minister Malcolm Turnbull insisted last month that they appear before the committee: Why didn’t the banks pass on in full to home loan customers the latest cut to official interest rates?

The banks will also be grilled on a series of scandals including giving faulty financial planning advice to customers, restricting payouts for disability insurance claims and allegations of rigging the bank bill swap rate.

Labor wants a royal commission into the banks and the Coalition government has given the corporate watchdog ASIC more funding so it can investigate and prosecute wrongdoing.

Ahead of their appearances, treasurer Scott Morrison announced new rules and tougher penalties around the setting of important market benchmarks such as the bank bill swap rate (BBSW).

The new changes also carry significant penalties for manipulation of “any financial benchmark” used in Australia, with threats of jail as part of specific criminal and civil offences.

Meanwhile, the summons to appear before the committee, which has the full powers of parliament, is a part-answer to calls for a royal commission.

The banks were widely criticised last month for only passing on about half the 0.25 percentage point cut in cash rates to 1.5%. The banks instead also increased some rates on deposits.

That prompted prime minister Malcolm Turnbull to start an annual grilling of the big four CEOs.

“There is no commercial basis for them (not to pass one the rate) other than for them to improve their profitability,” Turnbull said. “They had every cause to pass on the full extent of that rate cut.”

Turnbull is hoping the prospect of being grilled before a parliamentary committee will bring about a cultural shift among the banks.

“What we have here with the banks, in our view, is a need for cultural change and ongoing accountability,” he said.

Commonwealth CEO Ian Narev describes the interest rate decision as one balancing the interests of depositors, borrowers and shareholders.

“Our very reason for being is to balance between the interests of people who want to give us money to save and people who want to borrow money from us and our shareholders who give us the capital we need to survive,” he says.

“As a result of our decision we gave people a chance to earn more from their deposits, pay less from their home loans and we gave our shareholders to best chance of keeping a strong dividend

“That’s how you balance interests. That’s how you stimulate an economy.”

He made those comments after releasing the bank’s full year results, including a $9.45 billion cash profit.

Shayne Elliott, the ANZ CEO, also described the decision as a balance between the interests of depositors and borrowers.

“We came to a balanced outcome of passing half of that rate cut onto our mortgage borrowers in particular and small business but also being able to afford to keep a little bit so we can afford to increase the rates that we pay for depositors,” he said.

Elliott is due to appear before the committee tomorrow. Andrew Thorburn of the NAB and Westpac’s Brian Hartzer are due on Thursday.

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