Thankfully NAB are not going to jump on board with the other banks and for now have said they will not be changing their existing policy.
I think the other banks have become greedy. So, have I got this right, what they are saying is, if interest rates drop then they won't be passing it on to their customers, but instead pocketing it so they can give their directors a huge pay rise.
WESTPAC and Bendigo Bank may soon announce they will set interest rates independently of RBA movements as the industry desperately attempts to limit public pressure to pass on rate cuts. If they do change policies, Westpac - the nation's No. 1 home lender with nearly $290 billion in loans - and eighth-ranked Bendigo ($22 billion) would be following No. 4 ANZ ($160 billion), which last month said it would review interest rates monthly, without regard to the actions of the Reserve Bank.
After years of moving their variable rates in line with the RBA, banks now want to dismantle community perceptions that there is a link between the official "cash rate" and their variable rates, The Daily Telegraph reported. A banking analyst said Westpac was facing a dilemma. "It has now reached the point where Westpac executives are privately pulling their hair out, considering they just raised $3 billion in a bond sale but at rates more than 1.5 percentage points above what banks in fact lend to each other," the analyst said.
A Bank of America Merrill Lynch index showed the margin banks were willing to pay had more than doubled over the past 12 months -- simply to get money in the door.
Last night a Westpac spokesman said he had "no comment to make about our plans" despite last month declaring it had "no intentions of changing the way we set interest rates".
However, Bendigo and Adelaide Bank boss Mike Hirst was more forthcoming, saying his bank would "absolutely" look to follow ANZ. "It's something we think we'll do this year," he said. "We need to break the psychological nexus the public have where they think what the Reserve Bank does is tied to what our funding costs are. "For there to be this misconception that currently exists isn't helpful, which is why we're looking to change."
Australian Bankers Association boss Steven Munchenberg said banks had a huge opportunity: "If banks want to set rates independently I think it will help the industry better understand how the industry is changing. "I think it is important to make it clear that interest rates on mortgages really are now much, much less reliant on the Reserve Bank and if (setting rates independently) helps underline that, then it's a sensible move."
A NAB spokeswoman said the bank would not be changing its current policy.
A Commonwealth Bank spokesman chose to provide no comment.