Two of Australia's big four banks have been grilled over whether they tried to profit from new lending rules imposed by the regulator.
The chief executives of the Westpac and ANZ, Brian Hartzer and Shayne Elliott, banks fronted what is now the third parliamentary banking inquiry in Canberra.
The banking regulator, the Australian Prudential Regulation Authority, said it was clamping down on interest-only loans in a bid to cool the property market earlier this year.
But Westpac increased rates on existing interest-only loans by 0.34 percentage points despite the banking regulator, APRA, telling them to only touch new interest-only loans.
During the inquiry today, the banks' CEOs were asked why, while complying with the new rules, the banks applied interest rate increases to existing customers when the regulation only applied to new customers.
"I'm saying at the time [the regulations were] unclear, and we engaged with APRA on that discussion. It took a number of months for them to clarify," Westpac CEO Brian Hartzer told the inquiry.
"Essentially no [it was not about profit]. The primary driver was to manage the balance sheet."
ANZ's chief executive, Shayne Elliot, was also grilled on why he too signed off on the rate hike at his bank.
"We started changing our approach in terms of lending standards, policies and pricing well before APRA put in place that speed limit," he told the inquiry.
"In fact, our first changes around interest-only started in April 2016."
'We've still got issues of misconduct'
Following a series of public relations disasters, the Commonwealth Bank was the first of the big banks to try and appease customers by abolishing ATM fees.
The three other big banks then followed the CBA's lead within hours of its announcement.
But the committee was also keen to probe a deeper issue: why the banks still have not adopted a key recommendation from the first inquiry.
Recommendation 7 proposed the banks get on the front foot and look for problems within their organisations rather than waiting for the regulator to act.
Westpac's Brian Hartzer defended his bank by saying it was unrealistic to expect it to guarantee nothing to ever go wrong.
"I'm not suggesting that, Mr Hartzer, with respect. And the management systems that I'm talking about go to business that are bigger than Westpac," Government MP Julia Banks said.
"We've still got issues of misconduct, we've got sexual harassment, we've got rigged forex trades, we've got liar loans.
"These things are still happening, and they're reported to the media. So my question is will you review recommendation 7?"
