The Reserve Bank of Australia (RBA) has come out in support of the country’s big banks, with Glen Stevens defending the increasing profitability of the big four in his address to the House of Representatives Standing Committee on Economics.

 

"You only have to look at the dimension of the banking problems in Europe to see we don't want banks that can't earn a good return," Mr Stevens said.

 

"Are they too profitable? Our assessment is if you look at the rates of return on equity at our banks over a lengthy period of time they're actually broadly in line with the listed company sector in general."

 

Mr Steven’s defence of the Australian banks comes after European banking giant Societe Generale released a damming report on the bank’s interest rate policies, finding that their hiked rates were being used to protect profit margins rather than shield themselves from higher lending costs.

 

The research suggests that the banks are maintaining high interest rates to protect their profit margins, rather than shielding themselves from international monetary pressures.

 

The study found that costs for Australian lenders have continued to fall over the last six months.

 

"Research suggests that effectively pretty much every source of funding that they use in terms of domestic deposits, short-term funding onshore, long-term funding onshore, has actually gone down," Societe Generale’s head of strategy Asia, Christian Carrillo said.

 

"There has been some widening in spreads between offshore funding rates and the rates that they use to hedge against, but if you take into account the overall rate they pay to fund overseas, even that has actually come down slightly."

 

The NAB recently lifted its standard variable mortgage rate to 7.31%, and the Commonwealth Bank followed suit, rising to 7.41%. ANZ had previously raised its rate  to 7.36% and Westpac lifted its rate to 7.46%.