"We know we need to do better. We understand that fairness means ensuring that high levels of customer satisfaction are uniform levels of customer satisfaction," said CBA CEO Ian Narev. He was responding to claims earlier this year that the bank rejected life insurance claims from people with a terminal illness.

"In recent years, it's clear that a trust gap has opened up, and we as an industry and individual banks need to work harder to close that gap," Westpac CEO Brian Hartzer remarked in his opening statement.

The customer and bank culture has been at the heart of the questioning by the House of Representatives Standing Committee on Economics, with apologies flowing from the chief executives of Commonwealth Bank of Australia (CBA), ANZ and Westpac for overcharging customers and giving bad financial advice. The CEOs said customers have been compensated, and those responsible held to account by the banks and the securities watchdog.

Australia's big four banks have been in the headlines for all the wrong reasons in the past year, for issues ranging from insurance scandals to accusations of interest rate rigging, and this week, they needed to make mea culpas to a Parliamentary inquiry.

But National Australia Bank's CEO was less contrite.

Andrew Thorburn said he does not think it is a systemic problem in his bank despite its financial advice scandal, which saw 750 customers compensated for a total of around A$14.5 million ($10.98 million), and 43 financial planners leave the company. He said that of the 1,700 financial planners in NAB's network, the vast majority were "doing the right thing."

Defending high interest rates

The four CEOs spent a lot of time defending high interest rates for home loans and credit cards, and high profits, trying to justify their decisions not to pass on the most recent Reserve Bank of Australia interest rate cut to customers.

When asked by a Labor party lawmaker, the party pushing for a stricter Royal Commission into the banking space, whether the RBA's cash rate was a major determinant in setting mortgage rates, Westpac's Brian Hartzer said "actually, no."

He described the mix of funding the bank uses for home loans, following a precedent set by the previous three CEOs who testified during the week and who all defended their decisions to only pass on only 10-14 basis points of the RBA's 25 basis-point interest rate cut at the start of August.

Hartzer told the inquiry that Westpac's lower net interest margins, which were a trend across the banking sector, were indicative that customers aren't overpaying on their home loans.

"If margins are rising, then we are growing those returns and if margins are falling, then our customers are retaining more," he said. "Our customers are not paying more relative to the cost of funding."

While ANZ CEO Shayne Elliott commented that RBA interest rate changes do not change all of his bank's borrowing costs, with customer and business deposits providing only 66 percent of ANZ's funding base.

In the face of a high level of consumer scandals and customer complaints, Prime Minister Malcolm Turnbull's government is looking at setting up a banking tribunal. The tribunal would have the power to hear and investigate customer grievances, rather than going through the courts. Speaking on local radio this morning, Turnbull confirmed he would set up a tribunal, but was waiting on advice from Melbourne University law professor Ian Ramsay as to what type of body would be best suited.

Three of the bank CEOs who testified this week said they were open to this idea, which could hand more power back to customers. However Westpac's Hartzer doesn't have a "strong view" on whether the Tribunal was the right way to go, but instead questioned adding "another layer" to the grievance process.

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