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Bank of Queensland (BoQ) chief executive David Liddy has called on the government to minimise the differential fees charged for using the wholesale funding guarantee, saying the current situation favours the big banks.
Speaking at a conference yesterday, Mr Liddy rejected calls for a wide ranging banking review and instead said a market solution was necessary to fix the effects of the GFC.
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“The big banks are reversing a decade long reduction in net interest margin (NIM) and it is not going into the positive. They are growing their net interest margin. Every regional bank has reported a reduction in NIM,” he said.
Research by Goldman Sachs JBW show the big banks are enjoying higher margins on mortgages thanks to lower funding costs brought about by the government guarantee.
Under the guarantee, smaller lenders with lower credit ratings are forced to pay higher costs than the big four banks.
Banks with a AA credit rating pay an annual fee of 0.7 per cent for the government guarantee, while those with an A rating pay 1 per cent and those with a BBB rating pay 1.5 per cent.
