21 June 2010 The Sydney Morning Herald Editor - Letters to the editor page Delivery by email:letters@smh.com.au Dear Sir or Madam, Re “It sure looks like gouging by the banks” by Stuart Washington, Business News, page 9 The article by Stuart Washington perpetuates a number of myths about the banks and the global financial crisis. No Australian taxpayers’ dollars were used to support Australia’s banks through the guarantee on bank funding. In fact, so far banks have paid taxpayers $1 billion for the guarantee and are expected to pay over $5 billion by the time the guarantee ends.  It is unlikely that a funding guarantee would have been needed for Australia’s banks, except that other countries with weaker banking systems put them in place, leaving Australia at a disadvantage. If Australia’s major banks were charged less for their government guarantee it was only a reflection of the strength of the management and regulation of our banks, making it very unlikely that the Government’s guarantee would ever need to be invoked. The claims of “gouging” are also without foundation. The claim of “fee gouging” is based on households paying 13c a week more in bank fees in 2008/09, largely driven by an increase in the use of bank services and products. In the last year alone, banks have cut fees by about $550 million. The claim that banks have passed on more than their funding costs to mortgage rates is also without foundation and has not been made by the Reserve Bank. The RBA has shown that when all banking services, including to businesses, are considered, bank margins had grown slightly as banks appropriately re-priced for increased business lending risk. The latest figures from banks show that margins have tightened again, continuing the longer downward trend. Finally, to claim that banks return nothing to taxpayers is nonsensical. Over the last three years, the main Australian retail banks have paid out $107 billion in interest on deposits … that’s about $700 million per week. In addition to the interest paid out, banks paid out $43 billion in dividends over the past three years to investors - superannuation funds (people saving for retirement) and retirees -and around $15 billion has been reinvested into growing their businesses over this time. Australia’s banks must remain solid and healthy if they are to continue to support Australia’s growing economy. Thirty cents in every dollar lent in Australia must be raised from overseas investors, who want to see safe, profitable banks if they are to keep investing in Australia.  While accusations of gouging may have populist appeal, they are not borne out by the facts. Yours sincerely, Steven Münchenberg