International Comparisons of Bank Margins 1. Introduction

  1. Since the de-regulation of the banking system, considerable public interest has been shown in the subject of bank interest ‘margins’ – that is, the difference between the rates at which banks lend funds and the rates at which they borrow.
  2. For a time the main focus was on whether bank interest margins were rising or falling. This particular question was considered by the House of Representatives Standing Committee on Finance and Public Administration in 1991. The Committee's Report (the Martin Report), concluded that there was no evidence of any widening in margins; if anything, there was a slight downward trend in the margin between the average interest rate charged for loans and the average interest rate paid on deposits. This conclusion was consistent with the views submitted to the Committee by the Bank.
  3. More recently, the focus has shifted to how margins in Australia compare with those in other countries. As with many international comparisons, data limitations make this a difficult issue to resolve. In the Bank's view, the two most quoted sources of international comparisons of bank margins – those by the OECD and Salomon Brothers, the US investment bank – are inadequate for this purpose.[1] The Bank has been sceptical about the prospects of compiling reasonably comparable international data on bank margins, even if considerable resources were devoted to the task. Given the interest in the topic, however, and the shortcomings in the existing data, the Bank agreed to a request from the House of Representatives Committee on Banking, Finance and Public Administration to try to compile some comparable data.


The OECD collection contains a disclaimer that ‘international comparisons in the field of income and expenditure accounts of banks are particularly difficult due to considerable differences in OECD countries as regards structural and regulatory features of national banking systems, accounting rules and practices, and reporting methods’. The Salomon Brothers collection was contained in its publication ‘Bank Annual’ until 1993; the international comparisons data were dropped from the 1994 edition. [1]