The Commonwealth’s Ian Narev fronts parliament on interest rate decisions

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Commonwealth Bank chief executive Ian Narev, the first of the big four bank CEOs to front up before parliament, has started his opening address to the House of Representatives economics committee in Canberra.

He immediately hit the central question and the main reason prime minister Malcolm Turnbull insisted last month that the banks appear before the committee: Why didn’t the banks pass on in full to home loan customers the latest cut to official interest rates?

“When we set interest rates we balance the needs of borrowers, deposit holders and shareholders,” Narev told the committee.

Narev says the bank appears before the committee in a spirit of openness and with a willingness to listen carefully.

He acknowledged that the bank had “done wrong” by some customers.

On criticism of its insurance arm CommInsure not payout out to some customers, Narev said the bank has sinces paid 17 customers retrospectively after changing definition of heart attacks.

Ian Narev at the parliamentary committee. Image: Screenshot

Narev also defended the bank’s profit levels. Last month the bank announced a full year cash profit of $9.45 billion.

“Our profits are at a level that enable us to keep the confidence of global funders who play a critical role in our ability to consistently extend credit,” he told the committee.

The banks have been hit by 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 (the Commonwealth Bank is not included in this).

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

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

The official focus is:

  • Domestic and international financial market developments as they relate to the Australian banking sector and how these are affecting Australia.
  • Developments in prudential regulation, including capital requirements, and how these are affecting the policies of Australian banks.
  • The costs of funds, impacts on margins and the basis for bank pricing decisions.
  • How individual banks and the banking industry as a whole are responding to issues previously raised in Parliamentary and other inquiries, including through the Australian Bankers’ Association’s April 2016 six point plan to enhance consumer protections and in response to Government reforms and actions by regulators.