Feds accuse banks of profiteering

NZ's farm businesses have received only around half of the 150 basis points cut from the Official Cash Rate (OCR) since 4 December.  A survey of business overdraft interest rates, conducted among members of Federated Farmers in early to mid January, shows that business overdraft interest rates have been cut by an average of just 78 basis points.  Survey results are included with this media release.  "Federated Farmers is extremely disappointed in the trading banks that the average overdraft rate for farm businesses is 10.40 percent, or over twice the current OCR.  That's a massive margin banks have and continue to build at the expense of the productive export sector," says Philip York, the Federation's economics and commerce spokesperson.  "The survey backs up anecdotal reports by members that since the current OCR easing cycle commenced back in July 2008, farm businesses have not seen the OCR cuts reflected in their financial facilities.  "We think Dr Bollard was mindful banks were dragging the economic chain when he warned financial institutions on 4 December to "˜do their bit', by passing on OCR savings to their customers.  Banks seem to have interpreted this as meaning their retail, rather than business customers.   "The key thing about an overdraft facility is that it provides vital working liquidity to small and medium sized enterprises.  Farmers, who largely receive seasonal payouts, depend on overdraft facilities to meet financial commitments throughout the balance of the year. "The banks are literally farming the farmers to keep their profits high. Also see differing views here on this issue, on www.interest.co.nz/blog