In February, the Australian Securities and Investments Commission (ASIC) launched a review to update its responsible lending guidance (RG 209), which has been in place since 2010.
ASIC opened consultation by inviting submissions from stakeholders within the financial services sector and has since commenced a second round of consultation in the form of public hearings, in which stakeholders that provided submissions have been called to provide further guidance.
Appearing before ASIC during its first round of public hearings, interim CEO of BOQ Anthony Rose called for more prescriptive measures in ASIC’s guidance that would not leave lender obligations open to interpretation.
“Whatever determination ASIC makes about the appropriate settings for the responsible lending framework, we believe greater clarity and certainty over the regulator’s expectations should be incorporated into the regulatory guidance,” he said.
“Hearings throughout the royal commission have shown that different banks have clearly interpreted the current guidance in different ways.
“In our view, regulatory guidance that provides too much latitude for subjectivity and interpretations is not the best outcome for customers and competition.”
Mr Rose said that the bank had previously adopted a credit policy in response to regulatory guidance, which involved greater scrutiny on a borrower’s income and living expenses relative to competitors.
The interim CEO claimed that BOQ’s response to former guidance produced “better quality outcomes” but limited its competitiveness in the home loan space, particularly via the third-party channel.
“We haven’t seen as much flow and activity through [the broker] channel as a consequence of the additional requirements that we have in place,” he said.
Mr Rose called for the removal of incentives for some lenders to capture a greater portion of the mortgage market by lowering their lending standards to attract new business.
“Where ambiguity exists in the responsible lending obligations, there is a potential incentive for some banks to adopt lower standards and use this as a competitive advantage against those with processes and methodologies that provide more protections for customers,” he added.
“Having lenders compete on price, innovation and customer service will deliver good customer outcomes. In contrast, creating incentive for lenders to compete with each other through the application of differing responsible lending standards is not in the best interests of customers or the industry.”
When asked why BOQ had not eased its credit policy to better reflect the standards of its competitors, Mr Rose said that the bank was waiting for further guidance before implementing widespread reforms.
“We probably understand at the moment that we may well have a degree of application to how we’d interpret responsible lending obligations that may be beyond where we would all land,” he said.
“We’re averse to reducing from that level with haste, given the fact that the settings are being re-established through this process.
“We’d prefer to do this in one go rather than have a couple of goes at it.”
ASIC’s first round of public hearings concluded, with the second round of hearings to commence in Melbourne on Monday, 19 August.
The regulator is expected to publish its new guidance before the end of the calendar year.
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).