NO EVIDENCE THAT BANKS AS A WHOLE BENEFIT FROM CHANGES IN THE OFFICIAL INTEREST RATE CYCLE Sydney, 11 December, 2003: The Australian Bankers’ Association says it has seen no evidence that banks as a whole benefit from changes in Reserve Bank official rates over a credit cycle.   David Bell, Chief Executive of the Australian Bankers’ Association (ABA), said: “Interest margins – difference between borrowing and lending rates – have trended downwards for a long time now.”   “It is not possible to look at one or two retail deposit products and draw conclusions about whether banks are profiting from changed official rates. Analysis must consider the entire lending and deposit book of the bank over a cycle.”   Mr Bell said that interest rates on everyday transaction accounts tend not to follow official cash rates like home loan rates do.   “For example, between February and December 2001 official interest rates decreased 2%. Home loan (variable) borrowers got the full reduction, whereas transaction account rates - to the customers’ benefit - did not.”   Mr Bell said that it is important to recognise the underlying purpose of accounts. Some accounts are for everyday transactions, others for long-term saving – like term-deposits.   “Term deposits are regularly re-priced in accordance with wholesale market movements. They typically move in anticipation of Reserve Bank rate changes.   “The ABA is only an observer in this issue. We are not privy to bank interest rate decisions. Ultimately interest rate policy is determined by individual banks in the competitive marketplace.”     For further information:   Heather Wellard ABA Public Relations Phone: 02 8298 0411 Mobile: 0409 830 439 ENDS