PM berated banks for failing to fully pass on rate cut Banks cut...

• PM berated banks for failing to fully pass on rate cut
• Banks cut mortgage rates by 10-14 bps
• Series of scandals have given voice to calls for inquiry

(Recasts, adds opposition, analyst comments, context)

Australian bank chiefs will be interrogated by parliament each year to help improve industry accountability, the prime minister said on Thursday, an initiative that could help the country's highly profitable lenders dodge a sweeping public inquiry.

The "Big Four" banks have faced calls from varying corners of public life for a Royal Commission since the beginning of the year after scandals involving improper financial advice, interest rate rigging and fraudulent insurance claims.

But Malcolm Turnbull and his Liberal Party have ruled out a Commission though it has significant support in parliament, including from minor parties whose clout has grown since an election last month.

For banks, Turnbull's alternative is the lesser of two evils.

"Obviously it's not a Royal Commission which the Labour Party and some of the minor parties are pushing for," said Morningstar analyst David Ellis. "But it will be challenging for the CEOs. They will definitely be put on the spot."

Turnbull criticised lenders on Wednesday for not lowering interest rates to match a quarter-point cut in the central bank's policy rate earlier in the week. He demanded chief executives appear in public and explain themselves.

The "Big Four" - National Australia Bank Ltd (NAB), Commonwealth Bank of Australia (CBA), Westpac Banking Corp (WBC) and Australia & New Zealand Banking Group Ltd (ANZ) (ANZ) - lowered borrowing costs by just 10-14 basis points.

The banks cited rising funding costs in an uncertain economic environment and regulatory pressure that has forced them to raise deposit rates by as much as 75 basis points.

Turnbull hopes an annual appearance before parliament's economics committee will ensure greater transparency into banks' decision making and the way they balance the needs of borrowers, savers and shareholders.

"What we will do now is institutionalise regular accountability and transparency," Turnbull said at a press conference in Canberra.

"So this will become, if you are a bank chief executive appearing before the House economics committee, part of your regular annual schedule."

Earlier this year, the ruling Coalition strengthened the corporate watchdog, giving it power to prosecute those responsible for malfeasance in the banking sector.

Meanwhile, banks have announced unprecedented reforms to improve culture and boost transparency.

But the Labour Party was not convinced by Turnbull's initiative, calling it a "wet lettuce exercise."

"Let's call this for what it is – it's what you do when you want to be seen to be doing something but can't possibly be seen to call a Royal Commission into the financial services sector," Shadow Treasurer Chris Bowen said in a statement.

The "Big Four", in separate statements, welcomed the opportunity to appear in front of parliament, with ANZ CEO Shayne Elliott calling it a "necessary initiative."

"I welcome the opportunity to represent ANZ's views and to answer the tough questions that I know will be forthcoming in any parliamentary appearance."