The Reserve Bank board meets today and it will be a huge surprise if interest rates are not cut — the first official rate move in almost three years, taking them to a fresh record low.

Key points: RBA's last interest rate cut was in August 2016

RBA's last interest rate cut was in August 2016 Official cash rate will be 1.25pc after today's widely-expected cut

Official cash rate will be 1.25pc after today's widely-expected cut Big four banks have not committed to passing on the full RBA rate cut

Many eyebrows were raised when rates stayed the same, "on hold" to use economists' jargon, at last month's meeting.

But, since then, RBA governor Phillip Lowe has raised expectations by explicitly stating that today's meeting will consider the case for lower rates.

It was a statement that moved financial markets and economists' expectations.

Given the strong headwinds building in the economy, Mr Lowe will have some explaining to do if his words prove hollow.

If the RBA does act, the focus will then fall on the banks. How much of any rate cut will they pass onto borrowers?

During last month's big bank-reporting season, ANZ, NAB and Westpac, revealed total profits of $9.1 billion for the first half of the financial year.

The Commonwealth Bank has a different reporting schedule. In February, CBA revealed its first-half profit fell 6 per cent to $4.6 billion.

By their lofty standards, it wasn't a great result, thanks to the slowing economy and falling house prices, but the banks are still in great shape overall.

Given their central role in keeping the Australian economy functioning smoothly, that's a good thing.

But those first-half results were also a stark reminder of why the banks are on the nose.

Because included in those results was $2.8 billion for remediation (and other costs) stemming from the banks' bad behaviour, which was highlighted so starkly at the banking royal commission.

That's $2.8 billion to repay customers who banks had ripped off — and, for bank shareholders, it's $2.8 billion of their money down the drain.

A chance to rebuild reputations

We all know the stories from the royal commission.

Fees for no service, fees from dead people, insurance that was nothing but junk, and so on and so forth.

And then, particularly from NAB, the refusal to accept that taking money the bank was not entitled to was dishonest — a view former chief executive Andrew Thorburn maintained until the day he was sacked.

In the midst of the bank-reporting season, AMP had its annual general meeting, where the carnage caused by its bad behaviour was on display for all to see.

Five directors, including the chairman and CEO, as well as many people further down the line, all departed after the revelations that, among other things, AMP lied to corporate regulator ASIC as well as doctored documents.

New chairman David Murray, standing with the new-look board, was matter of fact in telling shareholders at the AGM that those who caused all the grief for AMP were no longer with the company.

So, with banks' reputations trashed, a damning report from the banking royal commission still ringing in their ears, and the real prospect that criminal charges could be on the way for some, are they seriously interested in repairing their reputations?

They tell us they are, but as they say, actions speak louder than words.

The bank-reporting season ended the day before the Reserve Bank board's May meeting — that meeting where we thought rates may go down, but they didn't.

With that speculation swirling around, attention focused on how the banks would react.

If rates were cut in an attempt to shore up a struggling economy, would the banks pass the cut on in full, or would they keep some, or all of it, for themselves?

Was this the chance for the banks to get on the front foot and show they really do care about their customers and really do want to repair their battered reputations?

If it was, they didn't take it.

No promises to pass on full rate cut

Not one of the major bank CEOs said words to the effect, "if the Reserve Bank cuts rates next Tuesday, we will pass the cut on in full".

At Westpac for example, when the ABC put that to CEO Brian Hartzer, he spoke of funding costs and margin pressure.

Mr Hartzer went on to say: "I understand the interest in this, and we certainly understand that interest rates are really important for customers, particularly [those] who have loans; they're also important for depositors, and that's all I can say right now."

This was 24 hours before the RBA meeting when Westpac would have known exactly how it would have responded to any reduction in rates.

The clear implication: we're going to keep some, or all, of the rate cut, for ourselves.

Fast-forward to today, and with the June RBA meeting only hours away, the banks are again passing up the chance to get on the front foot and be seen to be supporting their customers.

No-one disputes that bank funding costs go up and down.

However, given a choice between passing on a rate cut in full, which would not only help their customers but also start rebuilding their reputations, the banks appear to have reverted to type.

Short-term profit targets are not going to be sacrificed.

