Small business furious as RBA reports suggest banks have gouged customers

The National Independent Retailers Association has called for a six month moratorium on bank fees after a RBA report suggested the big banks have raised interest rates well above the increases in the cost of funding.

A report into the relationship between bank funding costs and lending rates has suggested that the major banks may have gouged customers by boosting lending rates higher than the increases in their cost of funding.

The result is that lending rates are now 25 basis points – or one quarter of a percentage point – above the levels seen before the onset of the GFC.

“For the major banks, the increases in lending rates have more than fully offset their higher funding costs, with their net interest margins in late 2009 about 20–25 basis points above pre-crisis levels,” the report says.

“Since mid-2009, the major banks’ overall funding costs are estimated to have risen only a little more than the cash rate.”

The report comes just a few months after the big banks came under fire for increasing mortgage rates well above the RBA’s official rate rise.

Following the RBA’s decision to raise official interest rates by 0.25%, Westpac was heavily criticised after lifting its mortgage rate by 0.45%.

Peter Strong, chief executive of the National Independent Retailers Association, says the report underlines how small business has been particularly poorly treated by the banks during the GFC.

“They refused to decrease interest rates for small business when the rates were going down which added to uncertainty for small businesses, and now we find they have unfairly taken money from businesses and individuals.”

He wants the Government to try and force the banks to reimburse customers, either through lower interest rates or through a six-month ban on bank fees.

While both are almost certain not to happen, Strong has also called for the ACCC to investigate the level of competition in the banking sector and for the Government to make it easier for SMEs to switch banks.

The Australian Bankers Association says the increase in margins reflects higher charges for riskier forms of lending.