APRA counselling aggressive lenders
The Australian Prudential Regulation Authority (APRA) is seeking reassurances from lenders that they will monitor lending standards, as concerns about the housing market grow.
Speaking at the Senate Standing Committee on Economics hearing in Canberra, yesterday, APRA chairman, Wayne Byres, said the regulator was “counselling the more aggressive lenders” over its concerns about high-risk lending practices.
“Within our regulatory framework APRA generally seeks to avoid outright prohibitions on activities where possible: instead, our regulatory philosophy is to focus on institutions’ setting their own appetite for risk,” he said.
“We also use the regulatory capital framework to create incentives for prudent lending and ensure that, while institutions remain free to decide their lending parameters, those undertaking higher risk activities do so with commensurately higher capital requirements.
“Responding to potential risks in the housing market in this way is not new.
“We see it as standard supervision. In the period from 2002 to 2004, for example, there was a similarly strong run-up in house prices, and similar concerns about higher risk lending and emerging imbalances.
“We’re doing now what we did then: collecting additional information, counselling the more aggressive lenders, and seeking assurances from Boards of our lenders that they are actively monitoring lending standards.”
Byres also updated the Committee on APRA’s initial Quarterly MySuper Statistics reports, covering the four quarters ending September 2013 to June 2014.
“These publications mark an important milestone in the Stronger Super reform process, and are part of a much broader and richer suite of superannuation publications that APRA is implementing,” he said.
“However, it is critically important that users of the statistics remember that long-term performance is the key determinant of members’ retirement outcomes and consider all aspects of the products that are provided - not just investment returns over short periods.
“For MySuper products in particular, it will be sometime yet before there is sufficient information available to assess the impact of the reforms in enhancing outcomes for members.”
AUTHOR
Nicholas O'Donoghue
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