Although the argument that they need to remain solvent is what is being used, it's pretty hard for that to have much sway given how many billions the banks are making in profit.
Aside from the obvious (ha ha) moral implications, failing to pass on the rate cut also undercuts the Reserve Bank's (and the Government's by proxy)'s monetary policy as, many know, interest rate movements are used to stimulate or contract the economy - ignoring rate movements does not allow for this corrections/adjustments to properly occur.
Personally I think with all the waffle about how wonderful privatisation and de-regulation is, cases like this where the banks can and have ignored rate cuts so they can maintain profits, never mind the economic consequences or economc resolve from the Reserve Bank, should not be allowed - why is it not legislative requirement that all lenders must lend at the official RB rate?
No doubt, if the rate was going up, the banks would raise their rates, so the argument that they know better about the economy has little substance and as far as I am concerned, paints the banks exactly as many modern corporations seem to want to be - shareholder-at-any-cost profit driven and completely detached from their responsibilities.
Edited by Commander Slicer, 07 December 2011 - 02:51 PM.