Scrutiny of the banking sector should include high credit card interest rates, Green Co-Leader Russel Norman said today.
“The Official Cash Rate has fallen 5.75% but credit card rates have fallen only 1.5% on average across the banking sector suggesting yet another way that banks are not passing on savings to their customers,” said Dr Norman.
Many people have not seen a decrease in their interest rates. A quick search of current bank credit card rates see many still offering rates around 20%, no different to a year ago.
Reserve Bank figures also reveal that the spread — the difference between the bank's cost of funds and the rate the bank charges to — has increased 71% across the sector since April 2008. The spread is one indicator of bank profitability.
“It bothers me that Australian owned banks are still exporting huge dividends to their Australian lords and owners. I think it’s time the banks’ actions came under the scrutiny of a Parliamentary Select Committee.”
Dr Norman hoped that the terms of reference of a Select Committee enquiry would be wide to include: mortgage interest rates, credit card interest rates, the use of bad debt provisioning (as a way of concealing profit), current capital adequacy ratios, and the bonuses of bank CEOs. The industry was due for significant reform in the wake of the financial crisis and this would be the time to start that process in New Zealand.
“We need a strong banking sector. Banks represent the infrastructure of our economy and are central to all economic activity. This is why it is so important they demonstrate that they’re not just hoarding profits while everyone else struggles.”
Reserve Bank spread figures can be found at:
Reserve Bank credit card interest rate figures can be found at: