Latest / Best of Business / Kent Duston: Banking Reform Coalition spokesperson explains why banks take so long to pass on OCR savings

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Kent Duston: Banking Reform Coalition spokesperson explains why banks take so long to pass on OCR savings · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed B.
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  Speaker 2: It is seven after six News Talks. It'd be Liam
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  Speaker 2: Dan shortly on the bond markets that made Trump blink,
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  Speaker 2: and we'll get to Enebrady in the UK before seven too.
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  Speaker 2: Right now, the ocr dropped. We all saw that yesterday,
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  Speaker 2: but why haven't your mortgage rates joined them? Even for
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  Speaker 2: those of you on a floating rate, which many people
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  Speaker 2: still are holding up for a lower one, you'll yet
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  Speaker 2: to see the savings materialize. And I know what you're thinking.
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  Speaker 2: You're thinking, hang on, I saw the banks drop. Some
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  Speaker 2: of the banks drop the rates yesterday. Yes you did,
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  Speaker 2: but they dropped their advertised rates, not the effective rates.
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  Speaker 2: That takes longer. A and Z and bn Z interestock
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  Speaker 2: code Dots did some good work on this. Am Z
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  Speaker 2: and bn ZI the fastest to give you your savings about
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  Speaker 2: seven days, while kiwibank tacks an average of two weeks
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  Speaker 2: to pass along the cut. Vent Dustin started the banking
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  Speaker 2: reform coalition is with me tonight.
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  Speaker 3: Hi, Kent Cure, here are you going? Yeah?
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  Speaker 2: Good, thank you, thanks for being with me. So you
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  Speaker 2: don't like the time it takes for the banks to
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  Speaker 2: pass on the cuts from the OCR. How how long
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  Speaker 2: do you think it should take?
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  Speaker 3: Well, you know it's not just me, right, I don't
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  Speaker 3: think anyone likes the amount of time takes for the
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  Speaker 3: banks to pass on the OCR cuts because you know,
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  Speaker 3: after all, it's no harder than just hitting the heading
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  Speaker 3: the return key on the keyboard. And really there's no
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  Speaker 3: reason why it should not happen on the exact same
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  Speaker 3: day that the Reserve Bank lowers the OCR. You can't
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  Speaker 3: see any reason at all why why it takes weeks
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  Speaker 3: and weeks to do this.
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  Speaker 2: Look, I agree with you in principle, and there's that
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  Speaker 2: they've given a whole bit of the banks have given
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  Speaker 2: a whole bunch of reasons why it takes them so long.
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  Speaker 2: But there's one thing. If you look at the rate
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  Speaker 2: at which they drop after there's a cut versus the
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  Speaker 2: rate at which they increase after there's a hike, they're
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  Speaker 2: about the same, in fact, actually faster. ASB for example,
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  Speaker 2: dropped the rates faster than they raised them.
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  Speaker 3: Yeah, it's kind of interesting because you know, it does
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  Speaker 3: look like the banks are cherry picking a bit of
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  Speaker 3: data on this. In the Commerce Commissions Market study into
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  Speaker 3: personal banking last year, they commissioned a piece of work
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  Speaker 3: from the University of Auckland's Business School and it looked
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  Speaker 3: at the long run data and what it said after
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  Speaker 3: they did their big statistical analysis, you know, completely independent
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  Speaker 3: of the banks themselves, is that after four months, because
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  Speaker 3: you've got to take into account both the fixed rates
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  Speaker 3: and the floating rates. Right after four months, the banks
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  Speaker 3: had passed on ninety percent of the increase to borrowers,
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  Speaker 3: but they only passed on fifty seven percent of the decrease, right,
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  Speaker 3: So I think there's a long run behavior here from
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  Speaker 3: the banks that they are literally you know, rockets up
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  Speaker 3: but feathers down. And I think we see that when
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  Speaker 3: you know, we're talking about weeks and weeks to get
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  Speaker 3: what should be a pretty simple change through to existing borrowers.
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  Speaker 2: But you're talking about the amount we were talking about
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  Speaker 2: the time, So on the time, I mean, if they
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  Speaker 2: are dropping rates at the same or faster rate than
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  Speaker 2: they are raising them, does that not tell you something?
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  Speaker 2: Does that not tell you that. You know, maybe it
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  Speaker 2: is that their IT systems are crap, or I don't know,
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  Speaker 2: something's going on behind the scenes, or as they say,
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  Speaker 2: they have to do due diligence and there's a whole
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  Speaker 2: bunch of other things they need to take into account.
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  Speaker 2: Would that number not indicate that perhaps they're just slow,
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  Speaker 2: not bad?
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  Speaker 3: Well, you know, it's a bit hard to untangle slow
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  Speaker 3: from bad, you know, because after all, look, no one's
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  Speaker 3: arguing that their IT systems are terrible. Right. In that
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  Speaker 3: same market study the Commerce Commission, you know, they pointed
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  Speaker 3: out that the A n Z Bank their core systems
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  Speaker 3: had been depreciated all the way down to zero dollars,
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  Speaker 3: which means they're so old that in both accounting terms
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  Speaker 3: and operational terms, those systems are worthless. Right, So, yeah,
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  Speaker 3: their systems aren't bad, but that's their own decision to
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  Speaker 3: have not reinvested in up to date systems. So it's
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  Speaker 3: not like borrowers should have to pay a penalty for that.
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  Speaker 3: When it comes to the timing of the delays, again,
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  Speaker 3: the banks are fully in charge of this, you know,
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  Speaker 3: they're the ones who decide the notice periods and the contracts,
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  Speaker 3: and you know how it gets operationalized in their systems,
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  Speaker 3: and how quickly they notify borrowers and all those things.
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  Speaker 3: And it just seems that these delays are pretty self
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  Speaker 3: serving because it's pretty obvious that holding interest rates too
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  Speaker 3: high for too long costs us money and makes them profit.
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  Speaker 2: Kent, thanks for that, Kent. Dustin Banking Reform Coalition convena
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  Speaker 2: with us. Not happy with how long it takes. But
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  Speaker 2: I mean not that I'm here to stick up for
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  Speaker 2: the banks, because no one wants to be that guy.
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  Speaker 2: But they do take into account a whole bunch of
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  Speaker 2: different numbers when they're deciding what their rates are going
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  Speaker 2: to be, including swap rates, which has been all over
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  Speaker 2: the place over the last week. So I wouldn't you
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  Speaker 2: give a bit of leeway. Plus some of their according
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  Speaker 2: to the Banking Inquiry, computer systems are so antiquated that
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  Speaker 2: even passing the rates on for you know, if you're
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  Speaker 2: wanting to lower the rate for a saver, which is
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  Speaker 2: to their advantage, they can't do that until the first
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  Speaker 2: of the following month. That's how ms dos the computer
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  Speaker 2: systems are, so it might be, as I say, more
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  Speaker 2: slow than bad.
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