Mortgage business logo

Regulators to consider easing lending ‘impediments’

Regulators will meet with lenders later this week to discuss measures to facilitate the continued supply of credit to households and businesses.

The Council of Financial Regulators (CFR) – which includes the Reserve Bank of Australia (RBA), Treasury, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) – has issued a statement regarding the regulatory response the economic threat posed by the coronavirus (COVID-19) outbreak.

The CFR stressed that regulators are working closely with the federal government to help ensure that Australia's financial markets “continue to operate effectively and that credit is available to households and businesses”.

The regulators stressed that the financial system is well equipped to manage the crisis, stating that the banking system is “well capitalised and is in a strong liquidity position”.

The CFR added that “substantial financial buffers” are at the disposal of regulators, if needed to support the economy.

“The funding position of the banking system is strong. Australia’s financial institutions, market participants and market infrastructure providers have undertaken substantial investments in their operational capability to deal with the effects of the virus,” the CFR stated.

However, the regulators acknowledged that “trading liquidity has deteriorated” in some markets, requiring firms to “adjust to the volatile environment”.

md discover

The RBA has already moved to boost liquidity in the banking sector, purchasing $8.8 billion in assets through repurchase (repo) agreements in overnight market operations (OMOs).

In a separate statement, RBA governor Philip Lowe said the central bank will be conducting further one-month and three-month repo operations “until further notice” to provide additional liquidity to Australian financial markets.

Moreover, Mr Lowe said the RBA “stands ready” to commence quantitative easing – purchasing Australian government bonds in the secondary market in a bid to support the “smooth functioning of that market”.

Mr Lowe also revealed that the central bank will announce “further policy measures to support the Australian economy” on Thursday (19 March), with some analyst suggesting that the central bank may cut the cash rate pre-emptively to a new record low of 0.25 per cent.

Meanwhile, the CFR will be meeting with major banks later this week to discuss measures to enable the sector to better focus on its core operations, which may include the freezing of regulatory obligations for some entities.

“For their part, APRA and ASIC will take account of the circumstances in which lenders, acting reasonably, are currently operating during the prevailing circumstances when administering their respective laws and regulations,” the CFR noted.

“Both agencies also stand ready to deal with problems firms may encounter in complying with the law due to the impact of COVID-19 through a facilitative and constructive approach.

“In particular, each agency will, where warranted, provide relief or waivers from regulatory requirements. This includes requirements on listed companies associated with secondary capital raisings, annual general meetings and audits.”

In particular, the CFR said that in its discussions with lenders, it would be “emphasising the importance of a continuing supply of credit”, particularly to small businesses.

Accordingly, the council revealed that it would consider whether there are “impediments to lending” that regulators “could help to address”.

The CFR’s commitments come just a week after Prime Minister Scott Morrison released a $17.6 billion stimulus packaged to counter the economic threat posed by the coronavirus.

The stimulus package is aimed at supporting households and businesses manage the crisis by supporting business investment, bolstering cash flow and encouraging retail spending. 

[Related: Banks prepared for economic challenge]

Share this article

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

brokerpulse graph

What are the main barriers to securing a mortgage at the moment?