(Corrects size of cash rate cut to 25 basis points, not 250, fixes typographical error, paragraph 10)
* Banking tribunal being considered by Prime Minister
* Tribunal would help victims of poor banking practices
* Public angry over scandals, mortgage lending rates
* CBA CEO first to testify before parliamentary committee
By Jamie Freed
SYDNEY, Oct 4 (Reuters) - The head of Commonwealth Bank of Australia CBA.AX said he was open to the prospect of a tribunal to help victims of poor banking practices, adopting a conciliatory stance as a parliamentary committee began questioning banks amid a public backlash over lending policies.
Ian Narev, whose bank has faced scandals involving its life insurance and financial planning divisions in recent years, also told Australian lawmakers the bank would ensure it corrected its mistakes on customer accounts and learned from them.
Narev is the first CEO of the nation's "Big Four" banks to face three hours of grilling this week by the committee, which was formed after a series of industry scandals involving misleading financial advice, insurance fraud and interest-rate rigging.
The lenders have also not passed on official interest rate cuts to mortgage owners in full, provoking much public ire.
A banking tribunal, which is being considered by Prime Minister Malcolm Turnbull, would arbitrate disputes between aggrieved customers and the banks, with the power to make rulings and impose penalties on lenders.
"We ... understand that there can be an imbalance of power between us and our customers and they need a place to go," said Narev, adding that he understood it would be partially funded by the banking industry.
"If we can have a place where for customers who have an issue with their bank, there's a one-stop shop, it's very cost efficient from their perspective."
Within the committee, members of the governing coalition, who believe measures including the annual committee hearings will be enough to remedy poor bank practices, have a slim majority. Opposition politicians favour a more powerful Royal Commission to investigate the banks, but have so far failed to gain sufficient support for the move.
Narev also said the nation's largest lender has reduced interest rates on some term deposits after fund flows were higher than expected.
The bank in August raised interest rates on term deposit products and had used the increase to deflect criticism that it had failed to pass on a full 25 basis point fall in the central bank's cash rate to its mortgage customers, arguing it needed to prioritise savers.
Narev on Tuesday did not directly address whether the term deposit rate cuts would be linked to future decisions on whether to pass on full cash rate cuts to mortgage holders. The Reserve Bank of Australia on Tuesday held the cash rate steady at a record low of 1.5 percent. said the bank had forecast A$1 billion ($766 million) a week of fund flows into those products, but the actual flows had been closer to A$1.5 billion a week.
The head of Australia and New Zealand Banking Group ANZ.AX will face the committee on Wednesday while the leaders of National Australia Bank NAB.AX and Westpac Banking Corp WBC.AX will appear before it on Thursday.
($1 = 1.3050 Australian dollars)