Commonwealth Bank of Australia Chief Executive Ian Narev told a parliamentary committee on Tuesday the bank has reduced interest rates on some term deposits after fund flows were higher than expected.
The bank in August raised interest rates on term deposit products and had used the increase to deflect criticism from customers and politicians that it had failed to pass on a full 250 basis point fall in the central bank’s cash rate to its mortgage customers.
Narev said at the time that the bank was trying to balance the competing needs of mortgage customers with savers who had been receiving low interest rates on deposits.
Narev on Tuesday did not directly address whether the term deposit rate cuts would be linked to future decisions on whether to pass on full cash rate cuts to mortgage holders. The Reserve Bank of Australia on Tuesday held the cash rate steady at a record low of 1.5 percent.
Public anger over the failure by the country’s “Big Four” banks to pass on the full rate cut was one of the triggers for parliament summoning the lenders’ chief executives to testify before the committee.
Narev, the first CEO to appear before the committee, said the period of higher rates on offer for new one-year and two-year term deposits ended last week but the three-year deposit offer was still in place.
He said the bank had forecast A$1 billion ($766 million) a week of fund flows into those products, but the actual flows had been closer to A$1.5 billion a week.
“We never intended and we were very clear about this at the start, for those repriced deposits to continue indefinitely,” he said.
Narev, whose bank has faced scandals involving its life insurance and financial planning divisions in recent years, also told Australian lawmakers the bank would ensure it corrected its mistakes on customer accounts and learned from them.