‘It’s just too hard’: ANZ CEO laments credit scrutiny

Speaking at Aussie Home Loans’ 2019 Imagine conference in Sydney, ANZ CEO Shayne Elliott lamented the current state of affairs in the home lending space.

Mr Elliott said that scrutiny placed on lenders off the back of the banking royal commission has produced a risk-averse culture that errs on the side of caution, in fear of repercussion for supposed breaches of responsible lending guidance.  

The CEO called for greater clarity regarding what he described as “grey” and ambiguous guidance, which calls on credit providers to take reasonable steps to ensure a loan is “not unsuitable”.

Mr Elliott said that until such clarity is provided, the bank would avoid processing complex loan applications, which may put the bank at risk under existing arrangements.

“Until we get clarity, [we’re] just going to stay away from it. It’s just too hard,” he said.

“[Regulators] are now saying, ‘If you cross over the line, we’re going to take you to court,’ so the financial risks and reputational risks become too large, so we just avoid grey areas.

“We’ve all become very conservative.”

Mr Elliott added that out of loyalty to the bank, credit assessors have steered clear of loans perceived to be higher risk, in order to “protect” the bank from potential regulatory action.

“They’re trying to protect the bank, and they don’t want to get the bank into trouble, so on the balance of probabilities, they say that one [loan] looks a bit hard, so it’s easier just to say no,” he said.

“That’s a risk aversion that’s infected most of the banks at the moment. 

“I’d say the pendulum is swinging a bit so we’re becoming a bit more normalised, [but] it’s still a long way from where we need to be.”

He added: “What we need is clarity. We want greater clarity from the regulators about that definition.”

ANZ has continued to record contractions in its mortgage portfolio over the past six months, with Mr Elliott previously attributing the decline to a “conscious” decision by the bank to target lower-risk borrowers, as well as “clumsy” response to regulatory scrutiny.

The Australian Securities and Investments Commission (ASIC) is currently reviewing its responsible lending guidance (RG 209) and has commenced a second round of consultation in the form of public hearings.

Mr Elliott welcomed the opportunity to consult with the regulator, with ANZ set to appear before ASIC at the hearings in Melbourne on Monday, 19 August.

[Related: ‘Belt tightening’ provision rejected at ASIC hearing]