Powered by MOMENTUM MEDIA
realestatebusiness logo

Subscribe to our newsletter

Banks slam APRA lending guidance

Australian lenders have hit back at the prudential regulator’s draft practice guide on residential mortgage lending for being “unduly prescriptive”.

The APRA draft Prudential Practice Guide 223 Residential Mortgage Lending (Draft APG 223) was published in May amid concerns that lending standards were slipping.

But the Australian Bankers’ Association this week addressed APRA’s guidance with a list of concerns.

In a letter to APRA dated July 21, ABA tax and security manager Paul Stacey said that the prudential regulator’s draft guidance could have enunciated principles across each of the topic headings “without prescribing how ADIs should run their mortgage lending activities”.

The banks took issue with how excessively prescriptive APRA’s lending guidance is, “too often opting for a ‘one-size-fits-all’ approach, rather than establishing a set of principles which allow ADIs to prudently and flexibly manage credit risk within the parameters of their business models and risk appetites”.

Advertisement
Advertisement

“It should be remembered that it is as much in the ADI’s interest to manage credit risk on residential mortgage lending prudently as it is in interests of the economy,” Mr Stacey said.

The ABA noted a trend in more recent guidance notes and standards towards greater prescription.

“This trend is also evident in Draft APG 223 and relates to a number of areas including risk management framework, loan origination, valuation, hardship and collection, and also in relation to the requirements of the board,” Mr Stacey said.

“Excessive prescription tends to translate into additional compliance cost, given that different ADIs have different processes and risk appetites,” he said.

The ABA also highlighted that APRA’s lending guidance fails to complement and align properly with ASIC guidance, thereby “confusing rather than guiding”.

“ASIC guidance is appropriately focused on ‘the individual loan level’, as is consistent with its consumer protection mandate,” Mr Stacey said.

APRA guidance should be focused on ‘the portfolio level’ which is consistent with its system protection mandate, he said.

 

Banks slam APRA lending guidance
mortgagebusiness

Latest News

The state’s latest budget will build on previous rebates for off-the-plan apartments as part of a drive to improve housing supply and affo...

The focus to introduce interoperability across Australia has taken its first steps, with NSW confirming the amendments to its 2012 legislat...

The non-bank lender has priced its first Australian RMBS transaction for the year, said to be the largest-ever capital markets issuance to d...

VIEW ALL

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!

When do you expect the cash rate to start increasing?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.