“Usually it is the customers who are criticising the major banks. But when a former head of the Reserve Bank of Australia joins the debate, people will be taking notice.
Bernie Fraser was the Governor of the RBA for much of the 90’s. According to a report by leading banking research and advisory firm East and Partners, Mr. Fraser has slammed the major banks stating they have more room to move over interest rates. During the past year, the RBA dropped the official cash rate by 1.25%, yet property loans fell by just .93%. Mr. Fraser has also criticised the level of ‘real’ competition in the banking sector. At a time when a growing number of the so called smaller banks are now actually owned by the larger ones, you can understand his point.
The banks maintain that they need to strike the right balance between serving the needs of customers with delivering returns to shareholders. Yet Mr. Fraser believes the banks are earning much higher profits than other sectors of the economy. Looking at the share market over the past 12 months bears up his comments. As interest rates fell, the share prices of the big four banks rose between 37 and 58%. Shareholders also received increased dividends, so obviously it’s better to be a bank investor than a bank customer.
What precisely can borrowers do about it? Wayne Swan was recently quoted as saying, you should “get out there and shop around.” But as many have found, that is often easier said than done, which is where Finlease can step in. Through Finlease, Mark O’Donoghue has helped to swing the balance back in favour of small businesses customers. “The comments from the former head of the RBA confirm what we at Finlease have been saying for years. Our response is to go to the market and try to source a better deal when small business operators need equipment loans, property loans and the like. They don’t have to simply accept what the banks are handing them.”
Whilst the former RBA chief’s comments relate to home loan borrowers, the comments apply equally to the various forms of finance for small business. Whether you’re looking to finance equipment or you’re looking for property loan, the cash rate reductions haven’t been passed on in full. It may be worth taking Wayne Swans advice and shopping around, just get Finlease to do it on your behalf.”