Don't Blame The Banks - They're Just Doing Their Job

Sydney Morning Herald

Thursday January 10, 2008

Wayne Swan is naive to demand an explanation from ANZ for their recent mortgage rate rise ("ANZ rates row with Treasurer escalates", January 9). He clearly lacks a basic understanding of the recent turmoil in the credit markets and its implications.

ANZ's cost of wholesale funds has increased nearly 300 per cent over the past six months, as it has for the other three majors. They typically rely on the wholesale markets for half their funding needs. To suggest ANZ and the other banks should wear this extra cost is ridiculous.

The simple fact is the cost of money is going up and this is now being passed on to borrowers, as it should be. This is basic business. The decision to raise rates would not be made lightly, given the risk to market share and unwanted media attention, but the bankers' first priority is to their shareholders (of which I am not one).

I hold a mortgage but for me to expect the banks not to pass on the higher cost of funds would be a bit like me asking Mr Swan not to charge me tax this week because I lost my wallet ... it ain't going to happen.

Damian Eckersley Crows Nest

It's unclear what Wayne Swan is trying to do by berating banks for raising mortgage rates in response to higher borrowing costs in international markets. If he has a problem with this, he should be looking at further deregulation and/or reducing market concentration in the banking sector, not pressuring banks to set whatever rate he thinks is best. Surely Mr Swan does not want a return to the days when bank margins were heavily regulated or set by the government, when credit was unavailable to most and innovation in the economy was stifled as a result.

Brad Ruting Woolloomooloo

Wayne Swan must be forgetting something. Financial markets are deregulated. They were deregulated under the previous federal Labor government. Banks are free to decide their rates and customers are free to change banks if they are unhappy. No one need explain anything other than the implementation of the policy of Mr Swan's political predecessors.

Luke Toland Burwood

The banks are exposed to the US subprime mortgage crisis. While it seems there is no legal obligation, is there not an ethical obligation to pass this cost onto shareholders in the form of decreased dividends, and not onto mortgage holders as increased interest rates? Investors buy shares knowing there is inherent risk in doing so; the rest of us just want a fair rate on our mortgage. NAB and ANZ have given further proof that it is the shareholder, not the customer, who is served first.

Daniel McClintock North Parramatta

The banks need some real competition so they will think twice before raising their interest rates. How about a national people's bank run by the Federal Government? It could be called the Common... oh! Well, maybe the Australia Bank.

Brendan Kavanagh Condell Park

© 2008 Sydney Morning Herald

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