Lenders eye concentration risk

Mr Kusher told Mortgage Business that strong investor activity, particularly in inner-city areas, is a potential risk.

“But I think if your loan book is spread out throughout the whole state or capital city it’s not so much of a risk,” he said.

“It is really making sure that when someone is lodging a loan application they have the ability to pay it back.”

Mr Kusher’s comments come after Bank of Queensland chairman Roger Davis revealed the bank’s “strict credit standards” involve fewer loans being written for properties in Sydney and Melbourne.

Speaking at the bank’s annual general meeting in November, Mr Davis said Bank of Queensland’s “strong risk policies” involved reducing its property exposure in riskier areas where growth has been the highest.

“We are comfortable with the bank’s existing housing exposure given our strict credit standards, strong risk policies and our increasingly diversified portfolio which remains underweight in the Sydney and Melbourne markets where growth has been the highest,” he said.

However, Mr Kusher said there are better ways to mitigate risk than just saying categorically ‘we are not going to lend here, we are not going to lend there’.

“I don’t think too many banks would be looking at a similar model,” he said.

“There is too much business to write in Sydney and Melbourne.”