Flipside of depositholder gouging

The Reserve Bank of Australia has continued its campaign to shame Australia's large banks to pass on interest rate cuts by pointing out that the banks' argument of rising funding costs is baloney.  On the flipside however, it is interesting to note that wholesale funding costs are not getting cheaper and that this only highlights the dependence Australian banks have on overseas funding - not a great position to be in entering a currency crisis.

...The big four banks, ANZ Bank (ASX: ANZ), Commonwealth Bank (ASX: CBA), Westpac Banking Corporation (ASX: WBC) and National Australia Bank (ASX: NAB) have repeatedly cited wholesale funding costs as one of the prime reasons for not being able to full pass on the RBA’s cuts to the official cash rate....Additionally, in an election year, the banks may come under sustained pressure to pass on in full the RBA’s cuts to mortgage borrowers. RateCity estimates the banks have passed on 1.33% of the RBA’s 1.75% cuts to the cash rate since November 2011 (here).

....There has been speculation in recent months that a recent slide in wholesale funding costs would give Australian banks room to cut mortgage lending rates in 2013.....But, in its quarterly Statement on Monetary Policy, released on Friday, the RBA said bank's overall funding costs were relatively unchanged, compared to late 2012....The RBA said although the cost of unsecured and covered bonds had fallen in recent months, making it cheaper for banks to source funding though those avenues, banks were still paying higher rates for previously issued bonds (here).