Union joins call to enforce fair play on banks

An inquiry which found banks have failed to fully pass official cash rate (OCR) cuts to consumers shows the Government needs to build protection measures, a bank workers union says.

The parliamentary inquiry was led by Labour, the Progressives and the Greens, and the findings were released today.

Statistical evidence produced for the inquiry showed that while most interest rates had fallen since the global financial crisis began late last year, major banks had not passed on the full impact of OCR cuts into short-term interest rates charged to customers, Labour's finance spokesman David Cunliffe said today.

"This failure was only partly offset by the banks' higher offshore and domestic borrowing costs," he said.

The report showed "considerable agreement" among submitters on a number of key banking and monetary policy issues.

Mr Cunliffe accused the Government of "failing in its responsibilities to hard-working Kiwi families and taxpayers" by refusing to take part in a bipartisan inquiry.

Bank workers' union Finsec said the cuts were not passed on despite the major banks surviving the global financial crisis comparatively well.

Finsec campaigns director Tali Williams said in one of the inquiry's peer reviews, Professor John Quiggin said "a better conclusion might be that the taxpayer is entitled to require that the banks will act as good corporate citizens".

Ms Williams said the statement was strongly supported by Finsec.

She said New Zealand taxpayers and consumers were underwriting the banks' business through government guarantee schemes.

"Meanwhile, the banks continue to be very profitable and are not doing everything they can to help customers through the global financial crisis. In this case, to the tune of billions of dollars."

Finsec proposed in its own submission that a "financial consumer agency" be set up as an independent regulatory body to protect and inform consumers and monitor bank behaviour.

The inquiry's findings meant the Government needed to consider such a protection measure for consumers.

Finance Minister Bill English said at the outset of the inquiry that nothing would come out of it and said that had been proven true today.

"Reserve Bank analysis shows that banks' interest rate margins had dropped and stabilised at a relatively low level," Mr English said.