Commonwealth Bank has sliced a range of term deposit interest rates, the second round of cuts since August when it was trumpeting higher rates on deposits as a win for savers.
It blamed the latest cuts, which took effect last week, on changes in credit markets and the ultra-low interest rate environment, which is crunching banks' profit margins.
When CBA and rival banks only passed on about half of the most recent official rate cut to mortgage customers three months ago, they also took the unusual step of raising some term deposit rates.
At the time CBA said its higher one, two and three-year term deposit rates would "provide an opportunity to the millions of Australians who rely on savings".
CBA reversed some of these changes in September, as did rivals in the following month. Now, CBA has made further cuts, so that most key term deposit rates are well below what they were before the August change.
Rates have been cut across six term deposit products, spanning from three months to five years, with the cuts ranging in size from 5 to 15 basis points.
Executive general manager of retail products and strategy, Clive van Horen, said the bank was balancing the interests of savers with those of its shareholders.
"The reason we have made changes to interest rates on some deposit accounts is due to the record-low interest rate environment, changes in underlying funding costs in local and international funding markets, and competitive conditions that affect the interest rates we are able to pay," he said in a statement.
CBA's changes included a 15 basis point cut in the one-year rate, to 2.25 per cent for customers with $10,000. Its two-year rate was also cut by 15 basis points, to 2.3 per cent. The three-year rate of 3.2 per cent remains unchanged.
It also reduced rates on three-month and seven-month term deposits, as well as four and five-year term deposits.
Mr van Horen singled out a fall in "swap rates", which represent the fixed rates at which banks can lock in funding for various maturities. Swap rates reflect the market's expectation of future interest rate moves.
As swap rates have fallen, it has been relatively more attractive for banks to use wholesale markets – when banks borrow from institutional investors.
Mr van Horen said swap rates had dropped "materially" over the last year.
"This is an economic reality that has to be considered when setting interest rates, along with external factors such as competitive conditions, our regulatory obligations and the costs of raising funds locally and internationally," he said.
Falling interest rates have eroded the margins of banks because as rates get closer to zero it becomes increasingly difficult for banks to cut what they pay depositors without prompting savers to put their assets elsewhere, such as into shares.
CBA also last week lowered its goal saver interest rate by 10 basis points to 1.85 per cent.
The changes come after banks have said competition for deposits had cooled in recent months. This allows banks to pay less for household savings.
Westpac's head of consumer banking George Frazis also said in an interview that its funding costs from deposits had "moderated" since late September, though they were still "elevated".
Separately, CBA on Friday said the next managing director of its Bankwest business would be Rowan Munchenberg, an internal appointment replacing Rob De Luca.