The Australian Green Party introduced two Bills to the Parliament that sought to limit the mortgage rates charged by banks.
There was also considerable discussion regarding the Government's banking package. Most of the focus related to whether a covered bonds plan would be part of the package.
However, there was countering commentary from the deputy governor of the Reserve Bank of Australia, Ric Battellino, that competition for deposits was intense and lending margins had not noticeably increased, despite Government suggestions to the contrary, Mr Timms said.
"He commented that the RBA took into account additional rate rises above the cash rate by the banks when setting monetary policy and the level of mortgage rates at the moment are in line with where the RBA thinks they should be."
Mr Battellino said the debate over bank mortgage rates lay in the fact the banking system had been so stable before the global financial crisis and as a result, people were not used to banks having to raise rates over and above official moves, Mr Timms said.
Craigs believed the Australian banking sector remained competitive as seen by the recent competition in retail deposits and the removal of several fee categories.
Nevertheless, the recent inquiries and comments by government officials would affect sentiment negatively and could potentially hurt banks' future earnings, he said.
According to media reports, the Julia Gillard Government was considering allowing Australian banks to raise money using covered bonds. The release of the banking package was due next month and the Australian Bankers Association supported the introduction of covered bonds.
Covered bonds were debt securities backed by cash flows from mortgages and public sector loans.
Covered bonds were not a silver bullet, Mr Timms said.
"We expect that any plan allowing the issuance of covered bonds by Australian institutions could be expected to lower funding costs for the whole industry.
"However, there is likely to be a maximum limit imposed to ensure there remains adequate protection of depositors' funds."
In the United States, the Federal Reserve was planning to put the country's largest banks through another stress testing process before they could increase dividend payments to shareholders or repurchase stock.
The Fed said it would assess the ability of the 19 largest banks to withstand losses during the next two years. Unlike the first round of tests, the results of the new capital reviews would not be made public.
