RBA confirms higher bank costs
(15 February 2012 – Australia) Funding costs for banks have risen in the past few months affecting both secured and unsecured bonds according to Reserve Bank of Australia (RBA) assistant governor Guy Debelle.
'Investors are demanding much higher compensation for bank credit risk now than they were in mid-2011,' said Debelle.
'The repricing probably happened in the last quarter of 2011, but the general lack of issuance made it more difficult to observe.'
Australia's four banks argue they face slowing demand from borrowers and a rising costs of funds from overseas. Commonwealth Bank (CBA) yesterday lifted their mortgage rate by 10 basis points, while National Australia bank (NAB) increased its standard by 9 basis points. On Friday, ANZ bank lifted its standard variable mortgage rate by 6 basis points, while Westpac increased it’s by 10 basis points.
Bendigo and Adelaide Bank raised its rate by 15 basis points.
'This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs,' said Debelle in an address to a Bloomberg seminar in Sydney.
Treasurer Wayne Swan condemned the banks’ actions, urging customers to shop around for better rates.
Debelle rejected comments that the banks' decision to break with the cash rate was blunting monetary policy.
''I don't think it changes the effect of monetary policy on the economy much at all. After achieving the right interest rates setting for the economy whether it's exactly right week by week is not as important as that it is right month by month. I don't think that has changed materially at all,'' he said, answering questions at the seminar today.
''When we move interest rates it is still going to have some impact on lending rates.''
'The repricing probably happened in the last quarter of 2011, but the general lack of issuance made it more difficult to observe.'
Australia's four banks argue they face slowing demand from borrowers and a rising costs of funds from overseas. Commonwealth Bank (CBA) yesterday lifted their mortgage rate by 10 basis points, while National Australia bank (NAB) increased its standard by 9 basis points. On Friday, ANZ bank lifted its standard variable mortgage rate by 6 basis points, while Westpac increased it’s by 10 basis points.
Bendigo and Adelaide Bank raised its rate by 15 basis points.
'This global repricing of bank debt has clearly affected the Australian banks' wholesale funding costs,' said Debelle in an address to a Bloomberg seminar in Sydney.
Treasurer Wayne Swan condemned the banks’ actions, urging customers to shop around for better rates.
Debelle rejected comments that the banks' decision to break with the cash rate was blunting monetary policy.
''I don't think it changes the effect of monetary policy on the economy much at all. After achieving the right interest rates setting for the economy whether it's exactly right week by week is not as important as that it is right month by month. I don't think that has changed materially at all,'' he said, answering questions at the seminar today.
''When we move interest rates it is still going to have some impact on lending rates.''
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