Banks can do better in passing on low interest rates

Banks have a major role to play to pass on lower wholesale rates to their small business customers, and help the economy to recover.

Michael Barnett, Chief Executive of the Auckland Chamber of Commerce said he had received a number of calls from disappointed businesses over the reaction of the banks to today’s cut in the wholesale rate to 2.5%.

He made two points:

• For banks to claim that they have already factored in today’s Reserve Bank announcement before it was made is extremely disappointing for a business to hear, when they should be expecting a cut in their bank rate.

• Small medium businesses are the backbone of the economy but many operate with a mortgage against their home that can be as high as 13%, well above the wholesale rate;

“Banks are not playing the game by keeping interest rates of small businesses so high, especially as the Reserve Bank has made it clear that the wholesale rate will remain low until late next year.

He strongly encouraged banks to respond immediately and look at cutting the interest rates of small businesses still saddled with high interest rates.

• For more information contact Michael Barnett on 0275 631 150