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PM to haul banks in front of parliament

AAP logoAAP 3/08/2016 By Colin Brinsden, AAP Economics Correspondent

Labor has been quick to dismiss Prime Minister Malcolm Turnbull's decision to haul the nation's big four banks in front of a parliamentary committee each year to improve their accountability.

Mr Turnbull and Treasurer Scott Morrison made the announcement after the big four banks passed on only around half of latest official interest rate by the Reserve Bank.

"The banks should have passed on the full rate cut," Mr Turnbull told reporters in Sydney on Thursday.

Mr Turnbull said the banks will be required to face the parliament's economics committee to give a full account of the way in which they are managing their affairs, their dealings with customers and their interest rate policy.

"They will be regularly accountable to the Australian people through their parliament in exactly the same way as the Reserve Bank is and APRA is," he said.

Treasurer Scott Morrison said all the banks have agreed to participate in the process.

But Australian Bankers' Association chief executive Steven Munchenberg wasn't overly impressed.

"The federal government is entitled to call the banks before a parliamentary committee, however no other businesses are required to justify their commercial pricing decisions in this way," he said in a statement.

He was confident the banks can explain why the interest rates they set for borrowers are determined largely by the costs of funds and the pressures of a highly competitive market, not the Reserve Bank cash rate.

Labor leader Bill Shorten thought it a "weak and pathetic response" from the prime minister.

"PM's solution to the banks' behaviour? Invite them to Canberra for lunch once a year," he said on Facebook.

Labor is still demanding a thorough investigation of the banks in the wake of a string of financial scandals which have hit mum and dad investors in recent years.

"I don't think anyone would imagine for a moment that appearing before a parliamentary inquiry for half an hour once a year is going to change banking practice," Labor deputy leader Tanya Plibersek told reporters in Adelaide.

Mr Turnbull said apart from being hugely expensive, a one-off royal commission would not deliver the same "permanent cultural change" as a regular parliamentary hearing.

CPA Australia boss Alex Malley thought it was "mystifying announcement" and one that was unlikely to work as banks would still operate on their commercial imperatives.

"In April we were assured ASIC was being given all the resources it needed to be the tough cop on the beat," Mr Malley told AAP.

" But now apparently the tough cop isn't enough."

Former Labor treasurer Wayne Swan said the most concerning point is the way the big banks took the same decisions within a matter of only an hour or two.

"To maintain any confidence in the system, this needs to be looked at by the ACCC as to whether they have breached the reforms put in place back in 2011 to stop price signalling," he told AAP.

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