Mike's Minute: Are banks behaving badly or not?

Regular listeners will be aware of my ongoing angst over banks and whether or not they are legit players in our marketplace. 

The Reserve Bank this week, in one final stab this year, will most likely cut the cash rate, again, which will leave it at 2.25%. 

The Co-operative Bank last week claimed they are the only ones who have fully passed on the cash rate cuts so far. 

In fact, as of the current cash rate at 2.5%, they have cut their floating rate to 3.1% against the cash rate fall of 3%. 

Now on the surface, if their claim is correct, that would back up the broad-based argument that retail banks are creaming it, and things need to be done about it. 

Certainly, the banks margins remain high and as of a couple of weeks ago those who reported, reported their margins expanding. 

Now the counter to all that is the Co-operative Bank themselves. If what they say is correct, good on them. But what does that prove? 

It proves there is competition. It proves that the market is dynamic and it proves that if you see their claim and think to yourself "hold on, how come I don’t have a deal that good?" you can in fact, and have always been able to, change banks. 

So in offering the insight inferring a lack of competitive behaviour, do they not to a degree shoot themselves in the foot? 

Further, I think it's fair to suggest that in reference to the floating rate not many people, generally, are on the floating rate. And even if you have a few at the moment waiting to lock up when a final cut comes, the overarching theme of New Zealand lending is one of fixed rates. 

So perhaps a better example would be what the competition is like around the part of the market that is most used and therefore most competitive. 

So you can see my dilemma, my ongoing issue. I can find you examples of banks behaving if not badly, at least suspiciously, thus giving weight to those who argue oligopolies. 

But I can find examples of good, clean, open competition where deals are to be done. 

So once again there's the simple question with seemingly no solid answer. 

Who is right? 

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Episode Transcript

Speaker 1 (00:00):
Regular listeners will be aware of my ongoing angst over
the banks and whether or not they are legit players
in our marketplace. Now, the Reserve Bank this week, in
one final stab this year, will most likely cut the
cash rate again, which will leave it at two point
twenty five percent. Now. The Cooperative Bank last week claim
they're the only ones who are fully passed on the
cash rate cut so far. In fact, as of the

(00:20):
current cash rate which is two and a half percent,
they have cut their floating rate three point one percent
against the cash rate fall of three percent. Now, on
the surface, if their claim is correct, that would back
up the broad based argument that retail banks are creaming
it and things need to be done about it. Certainly,
the bank margins remain high, and as of a couple
of weeks ago when the banks were reporting, they reported

(00:41):
their margins were in fact expanding. Now counter to all
of that is the Cooperative Bank themselves. If what they
say is correct, Good on them. But what does that prove.
It proves as competition, doesn't it. It proves that the
market is dynamic. It proves that if you see their
claim and think to yourself, oh, hold on, how come
I don't have a deal that good. You can, in fact,

(01:01):
have always been able to change banks. So in offering
the insight inferring a lack of competition and competitive behavior,
do they not to aggree shoot themselves in the foot? Further,
I think it's fair to suggest that in reference to
the floating rate, not many people generally are on the
floating rate, and even if you have a few at
the moment, you know, waiting to lock up when a
final cut comes. The overarching theme of New Zealand lending

(01:24):
generally is one of fixed rates. So perhaps a better
example would be what the competition is like around that
part of the market that is most used and therefore
I'm assuming the most competitive. So you can see my
dilemma here my ongoing issue. I can find you examples
of banks behaving, if not badly, at least suspiciously, thus
giving weight to those who argue oligopolies. But I can
find examples of good, clean, open competition where deals are

(01:47):
to be done. So once again, the simple question was
seemingly no solid answer. Who is right? For more from
the Mic Asking Breakfast, listen live to news talks that'd
be from six am weekdays, or follow the podcast on iHeartRadio,