The big four banks will this week face the heat in Parliament as they are put under questioning by a committee over their banking practices.
Today it was the Commonwealth Bank who copped the first grilling, largely surrounding their problems with CommInsure and claims of giving poor financial advice to customers.
The parliamentary committee was a solution put forward by the Turnbull Government in response to calls for more accountability in the banking sector, and calls for a Royal Commission into banking from Labor.
Labor today said the committee doesn’t go far enough and that they don’t have nearly enough time to ask questions of the banks in such a short time frame.
Opponents to a Royal Commission into the banks say it would be over the top and that a strong, profitable banking sector is crucial for the strength of the economy and to keep driving investment.
The Australian Securities and Investments Commission (ASIC) reported recently that it had recovered over $200 million in compensation and remediation for financial consumers and investors in the year to June.
Clime Asset Management’s David Walker gave his thoughts on the issue to Australian Broker.
“We can’t have a financial system that harms people – there are cultural; questions here about the banks,” he said.
“They need to be accountable for what they do.”
In recent times, the banks have also attracted criticism for not passing on Reserve Bank interest rate cuts in full to consumers, frustrating the RBA’s attempts to kick-start the economy with its monetary policy.
Banks say they have done so because the funding costs of lending have risen since the global financial crisis, as explained by new RBA governor Philip Lowe.
“”Since the crisis, what has happened is that the whole structure of interest rates relative to the cash rate has risen,” he told the parliamentary committee last month.
“Credit spreads went up a lot in financial markets and banks competed much more aggressively for deposits.”
All eyes will be on the rest of the banks as they front the committee this week, and whether it will change banking practices at all into the future.