The peak body representing Australia’s finance brokers has urged the major banks to stop talking up the credit squeeze and start helping borrowers by cutting interest rates, thereby following the lead of smaller banks.

Managing director of the Finance Brokers Association of Australia Peter White said ASIC chairman James Shipton was right to criticise banks at an industry summit on Wednesday.

“Mr Shipton has called out banks for blaming a credit squeeze on tough new interpretations of responsible lending regulations when the laws have been in place for more than a decade.”

The ASIC chair reportedly told banks to ‘lean in’ to their obligations saying he was unimpressed with industry reluctance to comply with long-standing laws.

“The big four banks cited increased costs when hiking rates months ago and just this week some bank leaders have tried to blame the royal commission for the credit squeeze and delays in assessing loan applications, claims APRA Chair Graeme Samuel called ‘a load of utter nonsense.’

Mr White said banks are still blaming everyone else for their shortfalls, despite ASIC forecasting increased court action against them partly because of alleged breaches of the Corporations Act, which demand services are provided “efficiently, honestly and fairly”.

He also pointed to a sharp decline in short term bank funding rates as the latest evidence supporting rate cuts.

“Smaller banks are already cutting rates and some economists are predicting two official rate cuts this year with the Reserve Bank moving to a neutral bias amid concerns about the slowing global economy and the declining housing market.

“The first official rate cuts of 2019 may be here soon, but going by history, I suspect the banks will protect their massive profit margins by refusing to pass on any cuts in full.”

Further evidence of the dominance of the big four banks came recently when many of the smaller banks, including Bank of Queensland, Bendigo Bank and Adelaide Bank warned of weaker earnings and challenging conditions.

“In the ongoing debate about the reforms impacting mortgage brokers there has never been a more crucial time for competition in the marketplace.”