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No commission but banks under pressure: PM

AAP logoAAP 4/08/2016 By Jennifer Rajca

Malcolm Turnbull concedes he can't tell the big banks how to run their businesses but having the bosses quizzed annually by "very grumpy" politicians will add pressure to decision-making.

That's not enough to satisfy Labor leader Bill Shorten, who accused the prime minister of flogging the banks - who failed to pass on the Reserve Bank's interest rate cut in full this week - with a "wet lettuce leaf".

Mr Turnbull has defended his decision to haul CEOs before the House of Representatives economics committee at least once a year, instead of holding a royal commission into the industry.

"When banks decide not to pass on the full extent of an interest rate cut from the Reserve Bank they will know that they're going to have to explain themselves in the full glare of a public, parliamentary committee room in Canberra," Mr Turnbull told 3AW radio on Friday.

"Imagine you're a bank chief executive and you're making a decision as to how much of an interest rate cut you're going to pass on and there will be somebody in the room, might just be a little thought in your own mind, saying, 'You know you better get this right because you're going to have to explain that to a committee of very grumpy members of parliament'.

"There's a lot of television cameras there and a lot of attention, so you better get it right."

He insisted the government couldn't dictate to banks what to do, but the appearances would become a "very important permanent change to the financial calendar".

"They will be fully accountable for their actions and that will give them cause for reflection, as to, for example, whether they will pass on a full extent of an interest rate cut," he said.

"They will clearly feel under greater pressure to do so."

Mr Turnbull says the reputational damage to the banks of not turning up to an inquiry hearing would be "gigantic".

He ruled out holding a royal commission into the sector, as Labor wants.

"What is the royal commission going to inquire into?" he asked.

Mr Shorten was sticking by his push for such an inquiry, describing Mr Turnbull's proposal as a "con job".

"The banks are not rattled in the slightest by Mr Turnbull's empty talk," he told reporters in Sydney.

"I think in the last few days we've seen how contemptuous and overconfident our banks are in terms of the government."

New senator Derryn Hinch views the move as an attempt to avoid a full-blown banks royal commission.

"It would appear to be a step just to try to avoid what some would see as an inevitable (royal commission)," he said.

Nick Xenophon Team South Australian senator Stirling Griff is in favour of a royal commission.

"So many people have been left financially devastated by financial institution malpractice over the years," he said.

"I would still absolutely like to see it happen."

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