Our biggest banks moved fast on yesterday’s rate cut – coincidence or collusion?
Within minutes of the RBA cutting the cash rate to an all-time low, the Commonwealth Bank announced a completely different way of responding. Instead of passing on all of the cut, it would only pass on half and pass on the rest to customers as higher term-deposit rates.
Less than two hours later, the National Australia Bank had announced its own variant on the idea. Either it had very quickly assessed the Commonwealth Bank’s plan and ran a variant of it through all of its decision-making processes.
Or it had some inkling of what the Commonwealth might do, which would probably be illegal under the anti-signalling provisions introduced into competition law in 2011.
Of course there’s another possibility, a genuine coincidence. The NAB may have independently made the same tentative decision as the Commonwealth ahead of the Reserve Bank’s announcement and had its announcement ready to go.
How the big banks cut rates
RBA: cut of 0.25 points
Westpac: cut of 0.14 points
NAB: cut of 0.10 points
ANZ: cut of 0.12 points
Commonwealth: cut of 0.13 points
The banks have moved to protect their profit against stiff competition for home loans and deposits pointing to higher funding costs
In recent months banks have faced a squeeze on their profit margins from the mortgage market while they have been unable to cut deposit rates. The move by the big four banks to only pass on some of the RBA rate cut is likely to offset some of this squeeze on their profit margins.
Read full article here: SMH RBA Rate Cut
Read related article here: SMH Banks Protect Profits