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Consult on macroprudential intervention first, urges COBA

Introducing macroprudential measures without “adequate consultation” could result in “anti-competitive” consequences, the customer-owned banking association has warned.

The Customer Owned Banking Association (COBA) has hit out at mounting speculation that the regulators may soon bring in new macroprudential measures to reduce the risk in the financial system and potentially limit the amount lenders can lend to mortgage borrowers.

On Tuesday (28 September), the Treasurer confirmed he had met with regulators to discuss the housing market and consider whether “carefully targeted and timely adjustments” would be required after APRA had recorded a rise in high debt-to-income lending during the June quarter, and its chair Wayne Byres having previously expressed concern. 

In its quarterly statement released on Wednesday (29 September), the Council of Financial Regulators (CFR) confirmed that the Treasurer and representatives of the Australian Competition and Consumer Commission (ACCC) had attended part of its quarterly meeting last week, adding that the meeting had looked at “housing credit conditions and associated risks”.

“Housing credit growth picked up over the first half of the year among both owner-occupiers and investors,” the quarterly statement from the CFR read.


“The recent lockdowns have reduced transactions and new listings, but prices are still rising briskly in most markets. Commitments for new housing loans remain at a high level, suggesting that credit growth is likely to remain relatively strong. 

“The council is mindful that a period of credit growth materially outpacing growth in household income would add to the medium-term risks facing the economy, notwithstanding that lending standards remain sound.

“Against this background, the council discussed possible macroprudential policy responses.

“APRA will continue to consult with the council on the implementation of any particular measure.”

While there has not yet been any confirmation as to what these policy responses would be, mainstream media reports have suggested this could include new debt-to-income ratio limits (which have taken several lenders by surprise).

Following this, COBA chief executive Michael Lawrence urged the regulators to think twice before introducing any wholesale changes, particularly highlighting the need for consultation to reduce any potential “anti-competitive” unintended consequences.

After suggesting that any measures should be “carefully targeted at a clearly identified problem” so they do not disadvantage smaller banks and first home buyers, Mr Lawrence said: “Adequate consultation prior to intervention will reduce the risk of unintended consequences on smaller banks from any macroprudential measures.”

He referenced comments from APRA chair Mr Byres from June 2021 in which he noted that while first home borrowers tend to have higher loan-to-value ratios (LVRs), there would not be any great value in us stomping on first home buyers who are trying to get into the market. 

“COBA endorses these views,” Mr Lawrence said. 

“Our sector’s focus on owner-occupiers and first home buyers is illustrated by our higher than system share of high-LVR owner-occupier loans as a percentage of new loans and our sector’s 20 lenders on the First Home Loan Deposit Scheme panel.  

Our sector’s prudent approach is highlighted by the non-performing loans ratio, where we are tracking at around the third of the system rate. 

“We look forward to seeing the forthcoming information paper from APRA setting out APRA’s framework for the use of macroprudential policy tools.” 

Potential changes would only impact ‘a very small proportion’: Frydenberg

On Wednesday (29 September) Josh Frydenberg was asked by journalists at a doorstop interview whether he believed there is a risk of “a sudden borrowing frenzy if these restrictions are flagged but come into effect soon”.

The Treasurer reiterated that Australia has to be “conscious of the balance between credit growth and income growth, and we’ve also got to be conscious of future risks building up in the system”.

“And so that is why APRA is looking very closely, the RBA is looking very closely at what particular levers they have at their disposal to ensure that we maintain stability in our housing market,” he said.

“Last time they looked at the serviceability buffers. Last time they looked at investor growth as part of the overall lending book and a range of other measures they had at their disposal. They’re deliberating that internally. 

“But what we do know is that the investors or the first home buyers or others who may be affected by this will be a very small proportion of the overall market.”

He added that while a final decision will be made by the regulators as to what levers they will pull in due course, he suggested that they will be specifically “designed to prevent the build‑up of future risks”.

“So, if you act now, it means you do not have to act in the same way or to a greater degree in the future. Doing something now means less is required later,” he told journalists.

[Related: Should lending be limited to 6x income?]

Consult on macroprudential intervention first, urges COBA

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