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Speaking to Mortgage Business’ sister publication, The Adviser for its livestream webcast, chief lending officer of La Trobe Financial Cory Bannister sought to “debunk” what he has perceived as “myths” regarding the rise of non-bank lending.
Over the past few months, financial regulators have raised concerns over the rise of non-bank market share, with the Reserve Bank of Australia (RBA) warning that continued growth in loans issued by non-banks could pose “financial stability risks”.
The Council of Financial Regulators (CFR) has also noted the rise of non-banks in its latest quarterly statement, claiming there is evidence that housing credit through the channel is “growing significantly” in comparison to credit issuance through established banks, particularly for the purpose of property development.
The CFR also noted that its members have “supported efforts to expand the coverage of data on non-ADI lenders” through new data collection powers recently granted to the Australian Prudential Regulation Authority (APRA).
However, Mr Bannister has expressed concern regarding the portrayal of non-banks, particularly by the mainstream press, as unregulated “shadow banks”.
The La Trobe Financial executive stressed that non-banks were subject to the same regulatory guidelines as established banks.
“One of the concerns I have is that in mainstream media, non-banks are often reported as ‘shadow banks’ and one myth would be that they’re unregulated,” he said.
“We (non-banks) have an Australian Credit License, with the same responsible lending guidelines as any major bank. So in terms of regulation, we are regulated exactly the same way as the major banks, and I think that’s often forgotten.”
Mr Bannister also sought to dispel claims that the pricing of loan products offered by non-banks placed disproportionately higher financial burdens on borrower, claiming that “non-bank options have more competitive options than the major banks”.
Further, Mr Bannister stated that the non-bank channel would remain viable over the long term, despite concerns over institutional stability in the sector.
“I think [the] injection of funding from overseas really validates the proposition of non-banks in Australia, and I think it sends a really positive signal to the market, that it is a very stable and viable sector, it’s not something that’s ‘shadowy’ or ‘under the table’.”
Mr Bannister joins CEO of Liberty Financial James Boyle and managing director of Firstmac Kim Cannon in addressing concerns raised by regulators and established banks regarding the growth of the non-bank sector.