ACCC ‘keen to understand’ credit and deposit rate hikes

The Australian Competition & Consumer Commission (ACCC) has said it will soon release a public issues paper for its deposits pricing inquiry, seeking stakeholder input on a range of issues relating to how banks price deposits and home loan interest rates.

Speaking at the AFR Banking Summit 2023 on Tuesday (28 March), the chair of the ACCC, Gina Cass-Gottlieb, flagged that one of the body’s “most important tools” in managing competition and “identify[ing] solutions for emerging problems and areas of potential market failure” was its “in-depth market inquiries”.

She highlighted that the ACCC has now commenced an inquiry into retail deposit products, following a direction from federal Treasurer Jim Chalmers MP.

Ms Cass-Gottlieb said the focus on how and why banks choose to pass on the cash rate hikes to consumers on deposits as well as mortgages, is a question that has been raised both in Australia and overseas, with the UK Treasury Committee of MPs announcing last week that it was writing to the Financial Conduct Authority to look at similar questions.

Noting the importance of the inquiry, the ACCC chair said: “Nearly all Australians rely on a bank, credit union or building society to hold and grow their savings. For many, the interest they earn on these savings is an important source of income.

“In a period of rapid RBA rate rises, consumers are understandably eager to ensure they are receiving a good deal from their financial institution on their savings.

“After all, Australian households together hold more than $1.3 trillion in deposit accounts.

“We are also mindful of the critical role that deposits play in our banking system.

“As such, we look forward to constructively engaging the sector and other stakeholders throughout the year as we examine the competition and consumer issues affecting these markets.”

While speaking at the summit, the ACCC chair revealed that the commission will be “requesting information from suppliers of retail deposit products, and working closely with other financial regulators to draw on their expertise and data”.

She said the watchdog will also soon release a public issues paper, seeking stakeholder input on a range of issues, including:

• How banks and other authorised deposit-taking institutions set their rates on retail deposit products
• How their approaches differ from rate-setting for credit products
• The role of deposits in their overall funding mix
• Consumer information and switching

“The Retail Deposits Inquiry provides an important opportunity to improve transparency on how banks set interest rates for savers, including the role of promotional rates,” Ms Cass-Gottlieb said.

“We are keen to understand the different approaches that suppliers have taken in light of cash rate changes, particularly between their deposit and credit products.

“This consideration will, in turn, inform our understanding of the nature and extent of competition for retail deposits.

“Of course, any analysis of competition also needs to consider the demand side.

“The ACCC will be seeking a deeper understanding of consumers’ interactions with suppliers and products. We are particularly interested in understanding the extent of, and any impediments to, consumers switching between deposit products or suppliers.

“We will be doing this as the consumer data right in banking sees increasing participation.”

The ACCC chair urged stakeholders to consider submitting a response to the issues paper and participate in the inquiry as it continues.

 [Related: Treasurer urges ACCC to look into deposit rates]