Bank moves to raise their interest rates independently of the Reserve Bank have been central in eroding public trust in the industry, corporate regulator Greg Medcraft says.

The chairman of the Australian Securities and Investments Commission on Thursday singled out interest rate setting as a key cause of a broad-based decline in community trust towards financial institutions, alongside scandals in wealth management and alleged interest rate rigging.

Since the global financial crisis, banks have repeatedly drawn the ire of politicians by raising their mortgage rates independently of changes in the RBA's official cash rate, and Mr Medcraft said such "out of cycle" moves amounted to a "breach of trust."
"I've been very annoyed about the movement out of cycle, because I think that's where the breach of trust is. Australians have always, they've gone, 'they'll pretty well go up and down with movement in the cash rate,' that's where the problem has occurred, frankly," Mr Medcraft told reporters after speaking at a Stockbrokers and Financial Advisers Association conference in Sydney.

"There's an enormous amount of trust there.. that they'll do the right thing."

Banks have repeatedly defended their decisions on interest rate pricing by pointing to changes in their cost of funding and the need to balance returns of depositors, borrowers and shareholders.

'Caught on the hop'

In the age of social media, Mr Medcraft also emphasised the "power of the crowd" to magnify this breakdown in trust among consumers, pointing to other examples where banks had lost customer trust.

"One of the issues for the banks, and others, is the expectations of the community are changing. I think that's one of the issues that caught the banks on the hop."

"What used to be seen as fair game is no longer."

He referred to "massive legacy issues" in life insurance, general insurance, responsible lending, ethics, alleged bank bill manipulation, and said these issues left people disliking banks.

"You sum all that up, and then people go...there was the comment of the Treasurer a few weeks ago, 'people don't particularly like you.'"

Mr Medcraft, who has been a persistent critic of banks in recent years, said the leaders of banks appreciated the challenge of changing community expectations, but it was a difficult issue for the sector to deal with.

"I think they have taken that to heart but they've got a big challenge now to win back that trust and they're even more challenged, that's more aggravated because clearly in a digital world, there's lots of people snapping at all their businesses."

"The tops of the banks, they get it, but it's challenging," he said.

Mr Medcraft has previously advocated "tracker" mortgages, a type of loan whose interest rates will only move in line with official changes in the cash rate.

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Really. A bit odd considering that it was his own department that helped frame the APRA legislation forcing banks to adjust their interest rates as risk changes in different asset classes. Un-fukken-believable.

Bankers, now I'm not talking about the teller or middle management or even CEO's, but the people above all these.

Bankers own the world we live and are the main reason why the world is in the state that it is in , surely you know this.....!!!

The_Barnacle wrote on May 29^th, 2017 at 5:52pm:


Way back in the olden days, a great man once chased the money lenders from the temple.

These were the forefathers of bankers.
Parasites who make.....NOTHING
who build.....NOTHING
Who contribute......NOTHING

And who charge and make a fortune at the expense of everyone who must use them.

I hate theives, and banks in cahoots with politicians and senior public servants are the worlds greatest theives.