Judo says banks have lost the skills and appetite to look after small businesses
(11 November 2019 – Australia) SME lender Judo Bank has called claims by major banks that responsible lending obligations have caused the dive in SME lending hogwash, saying it has more to do with banks’ not having the risk appetite to service the small business sector.
“Rejecting a quarter of all SME credit applications cannot be blamed on responsible lending standards alone,'' Judo Bank co-founder and CEO Joseph Healy, a former NAB business banker, said.
Research commissioned by Judo and conducted by East & Partners showed the gap between what small business borrowers need and what banks are willing to lend has blown out to $90 billion, from $83 billion, over the past 12 months, as banks become more and more gun-shy.
While banks say they are writing fewer loans to small business owners because of responsible lending obligations, the corporate regulator has said responsible lending obligations have never been a part of business lending arrangements.
Treasurer Josh Frydenberg identified the tension when he told The Australian Financial Review that he was recommending the corporate regulator waive the rules whenever it entered this “grey area”.
The Australian Securities and Investment Commission said concerns about tripping up over the longstanding responsible lending obligations are unfounded, and there has been no change to the rules that would spark a dip in volumes.
“Even if a residential property, even the family home, is used as security, it does not matter: any loan that is for business purposes is not covered by ‘responsible lending’ rules,” an ASIC spokesman said.
Bankers, however, have said the corporate regulator’s decision to appeal Justice Nye Perram’s ''steaks and red wine'' judgment, in the case between ASIC and Westpac, has placed the segment in limbo, leaving bankers to fly blind until the confusion is resolved.
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