Despite public criticisms about banks not passing the full rate cuts onto their customers, affecting credit applications, personal loans and home loans, some banks have struggled during the last financial year and increased the strong hold that the big four have on the market, especially the home loan market. Some banks did indeed, drop their rates (source: Bankwest Personal Loans)  but this cannot be said of all of Australia’s big four.

Meanwhile, the Australian Retailers Association says it is waiting on a decision by the big banks to drop their interest rates, to align them with lower borrowing costs. The ARA’s Director Russell Zimmerman was quoted as saying that savings ought to be extended before the Reserve Bank’s next review meeting in February. He compared the local 3% cash rate with the interest rates in Canada, New Zealand and Norway, which have dropped their interest rates to 1%, 2.5% and 1.5% respectively, and said that Australia was behind similarly performing economies.

He said that high local business costs had meant that local banks had not extended the full extent of the rate cuts to customers. He acknowledged also that borrowing costs had dropped and that it was now time to extend them to the consumer. Zimmerman also added that poor retail sales performances in November should be an incentive for the RBA even though Christmas retailer sales were slightly better in 2012 than they were in 2011. He said that some sales categories had still under performed and this had to be taken into cognisance as the Reserve Bank entered its first meeting for the year. He added that the economy would be under pressure in the run up to the next federal election but it was up to the banks and the RBA to play a supportive role until then.

Not all the banks have been laughing all the way to the, well, bank. The head of the Royal Bank of Scotland’s Australian operation says that lawmakers and regulators need to find the right balance with their regulations to give people access to adequate levels of credit. The bank’s head says the banking industry is not yet halfway through a decade-long period of change. The last 12 months have been interesting for the RBS, a period which saw the bank sell the majority of its local investment bank shares. The bank’s head, Andrew Chick, made the comments in light of the impending Basel III rules.

Local banks are anticipating if the Australian Prudential Regulation Authority is going to accept the changes with analysts wagering in favour of the APRA allowing the liquidity coverage ratio to be phased in. Chick said that the changes signalled the banking industry was becoming lower risk. He said that even though risk management by banks had been poor in the lead up to the global financial crisis now a balance had to be struck and that taking it to the opposite extreme, with a zero-risk environment was not necessarily the right answer for the economy.

RBS has been joined by Citigroup and UBS, who have also held back on their more capital-intensive operations.

Chick said the changes at RBS were “interesting”, referring to the sales of the bank’s Asia-Pacific investment bank to CIMB early on in 2012. The transaction included the bank’s Australian offices, which leaves them with three primary businesses: transaction services (which include trade finance and payments), debt products (debt capital markets and corporate lending) and markets (which include foreign exchange rate swaps). In the change staff members dropped from 620 to 180. CIMB is estimated to employ about 145 people so job losses are estimated to total 300.

Credit has been given to RBS for its timing on the deal as turnovers and equities dropped to their lowest since early in the 2000s and during 2009 causing debt capital market issuance to strike record highs.