Wellington  - A committee of the New Zealand Parliament has criticized the country's banks for failing to cut mortgage interest rates as much as they could in order to maintain healthy profits.

"We are not sure that the banking financial sector is carrying its fair share of the burden through this recession," Craig Foss, chairman of the finance and expenditure committee, said on Wednesday.

New Zealand has been officially in recession since early last year and the committee released a report Tuesday saying the banks could cut interest rate margins while maintaining an acceptable level of profitability.

The report noted that the trading banks had not reduced their interest rates to businesses and homeowners by as much as the Reserve Bank had cut its benchmark official cash rate (OCR), which has fallen from 8.25 per cent in July to a record low of 2.5 per cent.

"Unfortunately New Zealand is a capital deficient and indebted nation and we are trying to make sure that all those participating in the economy are carrying their fair share of the load to help us come out of the recession," Foss told Radio New Zealand.

He said the margin between the OCR and floating mortgage rates currently being charged by the banks - which now average 6.45 per cent - seemed to be very wide.

The committee said it understood banks' requirement to retain capital to remain in a strong position, but "we believe banks should not expect to maintain their usual rates of profitability in recessions, particularly when some sectors experience significant financial difficulties."

Most of the main New Zealand banks are subsidiaries of Australian parent companies and the committee also expressed concern that they were applying stricter lending criteria to local companies than they did in Australia.

David Cunliffe, finance spokesman for the opposition Labour Party, said the banks should be "good corporate citizens" and pass on interest rate cuts.

Jenny Fagg, chief executive of New Zealand's largest bank, ANZ National, rejected the criticism and said its half-year profit in March was 30 per cent lower than the previous year.

"The effect of the domestic recession has been felt most significantly in the retail business where profit was down 21 per cent on the previous comparable period," she said. (dpa)