In its submission to the Financial System Inquiry, ING DIRECT notes that the asset base of the Australian banking system is skewed towards residential property assets.
“While this asset class generally performs strongly, it does mean the industry and the economy are vulnerable to downturns in the property market,” ING DIRECT chief executive Vaughn Richtor said.
“We propose the inquiry looks at ways to expand the funding markets to include greater participation from retail customers,” Mr Richtor said.
“Various attempts have been made to establish a retail bond market; however, more is required, especially in the matter of simplified and straightforward documentation.
“The opportunity for retail investors to directly participate in the funding of the mortgage market would stimulate competition and product innovation,” he said.
ING DIRECT believes this could be done in the form of a listed fixed interest security such as a mortgage securities fund or a type of housing bond.