Reveal Cost Of Funding: Burrow

The Age

Wednesday October 8, 2008

Ben Schneiders

BANKS should be forced to publicly reveal details of their cost of funding so consumers can work out whether they are being ripped off when interest rates move.

The proposal put forward by ACTU president Sharan Burrow yesterday would see banks required to provide and update their funding costs daily on the RBA website.

"What we know is only the evidence before us. If you look at the double-A ratings that our banks have, they are among the strongest in the world, they are solvent," she said.

"If the banks can't pass on the interest rates, then it's a small requirement to say 'show us the evidence'."

Ms Burrow said working families could follow the funding costs - which would be measured against a local benchmark measuring the changes in bank costs - and decide whether or not they were getting a fair deal.

"There is a liquidity crunch, there is no doubt about that, and the cost of credit is higher. But what we're saying today is that working families are suffering a liquidity crisis as well. They need to know there is relief in sight."

The Australian Bankers Association said costs were already measured by the 90-day bank bill swap rate, and rejected the union push for greater disclosure.

Acting chief executive Ian Gilbert said he was unaware of similar measures anywhere else in the world.

"The call by the ACTU demanding a detailed explanation on funding costs would effectively require that banks disclose confidential information such as product pricing methodologies," he said.

Mr Gilbert said extra disclosure could have unintended consequences.

"While it may appear superficially an innocuous matter, fully disclosing pricing methodologies could lead to allegations of 'price signalling' and anti-competitive conduct, such as price-fixing," he said.

"The Trade Practices Act has provisions against such conduct and banks fully intend to comply with this law."

© 2008 The Age

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