Mortgage curbs give majors an ‘advantage’: CEO

Regulatory measures to curb investor and interest-only lending have benefited the big four “in an unexpected way”, says the chief executive of a challenger bank.

Speaking at the MyState annual general meeting on Thursday (19 October), MyState CEO Melos Sulicich called on the government to address a number of factors that reduced effective competition and reinforced the dominance of the major banks.

He said that regulators need to consider the impact that lending curbs have had on banking competition.

“As a smaller bank, MyState has been successful in increasing market share and building our loan book,” Mr Sulicich said. “This is despite recent regulatory changes which we believe have benefited the big banks in an unexpected way.”

The chief executive believes that APRA’s “speed limit”, restricting all banks’ investor lending to 10 per cent annual growth and interest-only lending to 30 per cent of flows, has “disproportionately constrained smaller banks’ ability to grow”.

“The larger banks’ investor loans are typically 35–45 per cent of their mortgage portfolios, while smaller banks’ investor loans are around 20–25 per cent of their loan portfolio.

“Instead of creating competition, this regulation has handed larger banks an advantage as rates on investor and interest-only loans increased.”

MyState chairman Miles Hampton argued that Australia’s regulatory regime should include a mandate to promote competition.

“This would ensure regulation encourages competition and benefits consumers, rather than exacerbating the already dominant positions of the major banks,” Mr Hampton said.

The chairman pointed to a recent submission by the regional banks to the Productivity Commission’s Competition Inquiry, which argued that APRA’s lending curbs have “locked in” the market share status quo.

The submission proposed that macro-prudential rules should better balance macro outcomes and banking competition.

[Related: MyState receives first Moody’s rating]

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