Banks warn of tightening credit if tougher regulation applied
(11 November 2018 – Australia) Australia’s major banks have assured the government they are keeping their doors open to small business but warned that over regulation could impede those plans.
In submissions on Commissioner Hayne’s interim report, all the major banks warned they won’t be so willing to lend to businesses if regulation on their decisions get much tougher.
While Westpac acknowledged in its submission on the interim report that “more still needs to be done” in relation to consumer lending, it called for a hands-off approach on small business lending, pointing out it requires banks to “exercise a degree of expert judgement” that’s more complex than consumer loans, including assessing industries, the quality of a business and market conditions.
If mortgage lending rules were applied to business loans, “the level of information provided, and the scrutiny required in these areas would significantly increase”, which could push up costs, Westpac said.
NAB said the consumer credit law “places greater emphasis on using past earnings as a means to assess servicing, whereas credit assessments for SME customers are based upon future forecast earning. Those measures may not always be applicable to a SME customer.”
The Council of Small Business Organisations and Commercial and Asset Finance Brokers Association of Australia also warned against the extension of the consumer responsible lending regime into SME lending.