murmurs of a radical move by cba tomorrow, page-11

Swan warns banks against rate rise excuse February 7, 2010 - 5:23PM
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Treasurer Wayne Swan has warned the banks not to use the government's withdrawal of its bank deposit guarantee as an excuse to slug consumers with higher interest rates.

The federal government said today it would withdraw its guarantee for banks deposits of more than a $1 million from the end of March.

The program to help banks borrow funds overseas, otherwise known as the wholesale bank funding guarantee, will also be phased out at this time.

Mr Swan said bank borrowing costs had returned to where they were before the onset of the global financial crisis in 2008.

This meant they would no longer be justified in raising interest rates beyond moves by the Reserve Bank of Australia.

He warned the banks to avoid using the withdrawal of the larger deposit and wholesale funding guarantees as an excuse to slug consumers with higher rates.

"If any major bank were ... to attribute some move above the Reserve Bank rate to a decision such as this they would be wrong to do so," Mr Swan said.

"They would incur the wrath not just of the Australian people but of the Australian government."

The government will continue to guarantee deposits of less than $1 million until the cap is reviewed in October 2011.