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The head of the Australian Prudential Regulation Authority has not ruled out taking more action to slow down the current level of lending to investors.

In a speech to the Australian Business Economists Lunchtime Briefing in Sydney yesterday, APRA chairman Wayne Byres said the regulator was waiting to see what affects policy changes instituted by lenders were having before taking any more action.

“Given many changes to lenders’ policies, practices and pricing are still relatively recent, it is too early to say whether further action might be needed to preserve the resilience of the banking system,” Byers said.

“We remain open to taking additional steps if needed, but from my perspective the best outcome will be if lenders themselves maintain a healthy dose of common sense in their lending practices, and reduce the need for APRA to do more,” he said.

Byers said actions taken by APRA, such as mandating that investor lending should not grow at more than 10% per annum, were necessary to protect Australia’s banking and housing sectors from practices that led to the global financial crisis.

“As we know, housing lending was at the centre of the global financial crisis.

“Those extremely poor practices – and the misallocation of credit that resulted – didn’t make it to these shores. But in a banking system such as Australia’s, there’s no room for complacency: the quality of lending for housing is too important not to be subject to a great deal of scrutiny.”

While those poor practice may not be occurring in Australia, Byers said there was evidence to suggest that lender providing finance for housing were operating in an environment of increased risk as underwriting standards have softened.

To the credit of lenders, Byer’s said there are signs they are working towards meeting the 10% growth limit and stressed the regulator was not trying to hand-brake lenders and investors.

 

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