ACCC to use compulsory information powers to probe banks on deposits

The competition watchdog will force banks to come clean on passing on interest rates using its compulsory information powers, as it seeks to shed light on how rates are set on deposits and bolster competition in the banking sector.

On Friday, the Australian Competition and Consumer Commission (ACCC) released an issues paper asking questions and calling on customers, banks and stakeholders to share their views as part of its inquiry into how much of Reserve Bank interest rate rises are being shared with Australian savers.

ACCC chair Gina Cass-Gottlieb said the watchdog’s early-stage observations showed that while home-loan interest rates had gone up “consistently and promptly”, there was more variability for deposit accounts.

“We’ve seen that the rises for deposit accounts have been slower, not as high and frequently conditional when they rise,” Cass-Gottlieb said.

The ACCC boss said that was at least partly a result of the concentrated power among the banks and that “we do have to start with a level of concern” about how effective competition is in Australian banking, where the big four banks hold about 73 per cent of all household deposits.

Treasurer Jim Chalmers in February ordered the inquiry into the broader deposit market, in light of mounting increases in the cash rate since May.

In 2018, the Productivity Commission found that CBA, Westpac, NAB and ANZ had substantial pricing power and that smaller lenders tended to mirror their pricing – an observation the ACCC will re-examine. “We’re seeking to test whether we’re seeing more competitive differentiation now,” Cass-Gottlieb said.

Barriers to competition include restraints on customers being able to switch where they hold their deposits, and regulatory barriers for the entry of new banks and authorised deposit-taking institutions. Once these barriers are lessened, Cass-Gottlieb said consumers could expect prices paid to depositors through interest rates to be higher.