Questions linger over banks

Parliament's finance and expenditure committee is still considering whether to hold an inquiry into the banking industry's interest margins in spite of the Prime Minister's comments that such a move would be of limited value.

The committee said it had "resolved to further investigate whether it will initiate an inquiry into the relationship between the official cash rate and short term interest rates, in the context of matters raised in its report on the Reserve Bank's financial stability report".

Fuelled by the RBNZ's report and commentary from its special adviser Ulf Schoefisch, the committee's own report "questioned financial institutions" pass-through of recent OCR cuts, related profit margins, lending terms, and noted the importance of maintaining a strong domestic banking sector.

The committee said it would seek further advice from the RBNZ and "appropriate advisers" before determining possible terms of reference.

Labour and the Greens have called for a parliamentary inquiry into banks' interest margins but on Monday John Key said he was "not sure an inquiry would achieve a lot".

Last week BNZ chief financial officer Ken Christie said he would welcome the opportunity to formally address the committee's concerns, but Westpac chief executive George Frazis said he believed an inquiry "would be unlikely to add value to the current debate".