The New Zealand Parliament's Finance and Expenditure Committee yesterday issued a report challenging Australian-owned banks to pass on more of the April 30 cut in the official cash rate and to treat New Zealand businesses fairly.The committee said in its report into the Reserve Bank of New Zealand's May Financial Stability Report that it was surprised bank profits had not fallen further in the last year."We are concerned that some banks have not passed on the latest 50-basis-point cut to the official cash rate in their interest rates for floating mortgages," the committee wrote, adding however that a large portion of the 575 basis points of cuts since mid 2008 had been passed on."In view of our concern that OCR cuts are not being passed on in their entirety, we asked why mortgage rates do not appear to reflect the price that the New Zealand banks are paying to fund their mortgage lending," it said. The committee also had a go at higher rates on fixed term loans, even while acknowledging evidence of increased cost of funds in offshore markets for term debt.The committee took the view that bank profits could and should be lower in the current banking climate, and also asserted that the taxpayer was subsidising banks courtesy of the guarantee on retail and some wholesale deposits."We were very surprised to learn that despite the severe impact of the current recession on business and household liquidity, bank profits declined only marginally in the past year, and principally as a result of provisioning against future credit losses."The committee said it "would expect that the banking sector would take on a greater role in sharing the burden of the current recession."