Federated Farmers claims first bank interest rates result

“The jet of hot steam unleashed last week by Federated Farmers in its bank overdraft survey has won its first result,” says Philip York, Federated Farmers economics and commerce spokesperson.

Federated Farmers has praised Rabobank for being the first major financial institution to pass on the full Official Cash Rate (OCR) saving to its variable base rate customers. The Bank’s move follows this morning’s record equalling, 1.5 percent cut to the OCR. It also comes after a critical survey issued last week by Federated Farmers, which showed the banks had hoarded much of the OCR cuts since July 2008.

“Rabobank has always led the other banks in passing on the OCR savings to its customers. It has effectively said ‘yes we can’ by passing on the full OCR cut. This signals to farmers and businesses in general, that similar cuts are possible if the other banks were minded to act,” Mr York added.

“Last week the banks came up with a myriad of reasons not to pass on much of the 4.75 percentage points now cut from the OCR. From depositor interest rates locally to the ‘high’ cost of credit offshore. What Rabobank has done today is to put a lie to all of that.

“While Federated Farmers will continue to place pressure on bank overdraft interest rates, given how important it is to working liquidity, Rabobank has at last introduced the fizz we see in the retail mortgage market into the business market. This is long overdue.

“Dr Bollard’s press conference comments made it very clear that bank balance sheets and margins are healthy. If the other banks wanted to look after their business customers as well as they have looked after themselves, they clearly can. Rabobank is proof of this so the time for the other banks to act is now, before we have to ask some very tough questions of them.

“Given rural debt was estimated in September 2007 to be around $42 billion, a cut of 1.5 percent across the board for farm mortgages would inject hundreds of millions back into the provincial economy. An economy everyone in New Zealand depends upon. It would also help alleviate a fair degree of the economic loss Fonterra announced yesterday in its revised payout forecast.

“Federated Farmers thinks Rabobank deserves a gold star for this bold move, but when will the other major banks do the same?” Mr York concluded.