Rba Chief Staunch In Defence Of Banks
The Age
Saturday April 5, 2008
RESERVE Bank governor Glenn Stevens has firmly backed the banks over their controversial actions in increasing their margins - revealing that had they not done so, the Reserve itself would have raised interest rates higher.
Appearing in Sydney before the House of Representatives economics committee, Mr Stevens defended the banks against criticism from both sides of politics, saying any other business would have done the same.He said the banks' actions had restrained the hand of the Reserve's board, which took account of the banks' margin rises when deciding how high to raise interest rates."I think it is likely that we would have been going up more on the cash rate to this point had those margins not been widening," Mr Stevens said.He said the US was now in recession or nearly there, but expressed confidence that Australia would ride out the storm he called "one of the most serious malfunctions in developed-country capital markets in a long time".After his initial statement, Mr Stevens faced little questioning on the credit crunch or the turmoil in global financial markets, as MPs on both sides focused on issues on which they hoped to score political points.But deputy governor Ric Batellino warned against the growing use by banks of agents such as mortgage brokers to market their loans, while assistant governor Philip Lowe applauded the Federal Government's pledge to regulate mortgage brokers and non-bank lenders.Mr Batellino described the practice of using agents to market loans as "quite dangerous . . . There is no doubt that the agent does not have the same incentives to maintain high standards as the bank itself."I think it is very important for the banks to maintain a direct relationship with their clients, and not to use agents. It is very important that individuals licensed to be agents meet very strict criteria and are highly qualified, because they can do a lot of damage by inappropriate selling."Mr Stevens conceded that the crisis had damaged competition from non-bank lenders, but predicted it would be only temporary.
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