Wellington, June 10 NZPA - At least one of the major banks appears uncomfortable with how the Government's retail deposit insurance scheme is affecting business.

The scheme guaranteeing deposits was introduced following the global credit crisis and adds an extra cost to those who signed up.

The major banks were criticised in a report by Parliament's finance and expenditure committee yesterday, with MPs accusing them of failing to reduce mortgage rates, and protecting their profits, despite falling official interest rates.

ANZ National Bank chief executive Jenny Fagg said this morning profits at the bank were down about 30 percent in the recent six months to March, compared with the corresponding period the previous year, despite suggestions profits had remained steady during the recession.

She accepted some Australian-owned banks were among the most profitable -- and highest rated -- in the world, but didn't agree with claims of greed.

"I don't believe we are gouging, and of course we will take into account the select committee's feedback," she told Radio New Zealand.

Asked if there was anything the Government could do to encourage them to lower mortgage rates and assist struggling customers, Ms Fagg questioned the retail deposit guarantee scheme.

"It's the strongest banks that are paying for that guarantee, we think that is distorting the market," she said.

"So that perhaps is one area the Reserve Bank could look at."

Ms Fagg said there was a concern the stronger financial institutions were subsidising the weaker ones, which would normally have to pay a higher rate to be part of the scheme.

A KPMG report reviewing financial institutions and released in April said the scheme had created a cost for banks and benefited weaker financial institutions.

National MP and finance and expenditure select committee chairman Craig Foss said this morning the committee was "frustrated" at banks.

He said the committee was "not sure" that the banking financial sector was carrying its fair share of the burden through the recession.

Mr Foss told Radio New Zealand that as well as making profits, banks existed to preserve capital and provide credit to help the economy grow.

But when there had been five or six quarters of negative or flat growth, but there was little change in profits or interest margins, "it's just not a good look is it?"