Aussies consider capping salaries

By Tamsyn Parker

Sir Ralph Norris. Photo / Supplied
Sir Ralph Norris. Photo / Supplied

Commonwealth Bank of Australia chief executive and New Zealander Sir Ralph Norris could see his $20 million salary capped as part of a package of banking reforms across the Tasman.

Australian Treasurer Wayne Swan said yesterday that he wanted bank executive salaries curbed.

"The Government is very keen to see some action in that area," Swan told Australian television.

The treasurer's comments are the latest in a political storm and public backlash against the Australian banks after the CBA's controversial mortgage interest rate rise and an earnings season which resulted in the major banks, which own New Zealand subsidiaries, reporting profits of about $22 billion.

CBA increased its rates 45 basis points last Tuesday, during the Melbourne Cup race, almost doubling the Australian Reserve Bank's 25 basis point increase.

So far the other major banks - Westpac, National Australia Bank and ANZ - have yet to follow suit.

The executive salary cap talk follows comments by Australian Prime Minister Julia Gillard about cracking down on fees which provide a disincentive for consumers to change banks.

On Monday Australian website news.com.au reported three of four major Australian banks were set to dump mortgage exit fees to avoid Government action.

The website said senior officials at the three banks believed exit fees, which cost up to A$900 ($1159) and are mainly made up of deferred loan set-up costs, would soon be a thing of the past.

Despite having Australian parent companies, New Zealand banks do not charge exit fees.

Massey University director of financial planning Claire Matthews said the exit fee was different to the break fees New Zealand banks charged when borrowers decided to break their fixed-term mortgage to switch to a lower interest rate.

High break fees resulted in a flood of complaints to the Banking Ombudsman last year by people who were shocked at the amount of money they had to pay to their bank to get out of their fixed mortgage.

In May, New Zealand's competition watchdog, the Commerce Commission, completed an investigation into break fees and found most banks charged reasonable fees.

The 18-month investigation found the ASB, SBS Bank, BNZ, National Bank, ANZ, Westpac and GE were likely to have charged reasonable fees.

KiwiBank and HSBC were given warnings over the formulas used to calculate fees and paid back money to some borrowers.

Matthews said given what the New Zealand subsidiaries were charging it would be reasonable for the Australian banks to reduce their fees.

"It does seem to be purely to penalise people," she said.

- NZ Herald

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