Commonwealth Bank senior executives have defended the interest rates they charge for small business loans, despite them being comparatively higher than they were during the 2008-2009 global financial crisis.
They admitted the bank got the pricing of such loans wrong during the GFC and were not pricing for risk appropriately.
"When the global banking system went through the experience of the global financial crisis, what we all looked at was the fact that appropriately pricing for risk has ceased to occur," CBA boss Ian Narev told the House of Representative economics committee in Canberra on Tuesday.
"Whilst conditions at the moment in terms of defaults are actually reasonably good ... we are safeguarding hundreds of billion Australia's deposit money, we must price for the risk of default over a cycle."
Mr Narev was answering questions from Liberal MP Craig Kelly who couldn't understand why the margin on business loans on average was 5.75 per cent above the RBA rate, and higher than during the GFC when economic circumstances are much improved now.
"There is a view generally because a business loan is secured by a mortgage over someone's home that therefore interest rates should be the same as the home loan, that's just not true," CBA's chief risk officer David Cohen said.
The loans were now more accurately priced given around 40 per cent of new businesses fail in their first couple of years.
