APRA has downplayed the significance of macroprudential tools by putting the current investor-lending boom in context.
Speaking at the Finsia annual conference on Friday, APRA chairman Wayne Byres said the newest thing about the current conversation regarding bank regulation is the word ‘macroprudential’.
“Actually a lot of what we are talking about is just normal regulation and regulation responding to circumstances,” Mr Byres said.
Comparing the current market conditions to those during 2003 and 2004, where house prices experienced rapid growth, Mr Byres said APRA had “the same playbook” and has taken the same course of action.
“At that stage we were talking about the issue and the governor of the reserve bank at the time was talking about the issue, we collected some extra data from banks to observe who the outlying guys were or who the more aggressive lenders were,” he said.
“We saw assurances from boards that they were keeping a closer eye on lending standards – all the things we have done thus far in the sense of this side of it.”
APRA then took additional measures to cool the property market by implementing changes to capital requirements and requirements around mortgage insurance.
“We did some other things designed to just temper the incentives and you shouldn’t think of this as some grand new framework and completely new, but I always think much of it is APRA doing its job, which is as things start to get a bit frothy or more exuberant or whatever – the right phrase might be there is a gradual ‘turning up of the dial’ of supervising intensity and regulatory intensity,” Mr Byres said.
“In many respects I suppose it depends on how far you want to take this concept of macroprudential, but at least in the way we are thinking about it, it is conventional supervision, conventional regulation and in very simple terms it is getting people to be prepared for adversity in the future – that is nothing new,” he said.
“People love the term macroprudential because it sounds like it is really important but there is not a lot that is new.”