Regulator sends warning to bank execs
(13 August 2012 – Australia) Australian bank executives have been warned not to underestimate lending risks, even when it comes to giving customers so-called "hardship concessions", by the Australian Prudential Regulation Authority (APRA).
Banks can give customers with temporary financial difficulties hardship concessions, which can include a reduction in the interest rate they are paying or the overall payment, lengthening of loan maturity, or full or partial deferral of interest for a temporary period.
The Sydney Morning Herald reported that the regulator has seen cases of banks wiping the slate clean when it comes to hardship provisions to stop their debt collection processes being activated.
''While this practice may be reasonable from an operational perspective, it can obscure prudent internal and regulatory reporting of past-due and impaired loans,'' APRA said in a letter to bank executives sent over the weekend.
APRA emphasised its comments related to the reporting of loans and should not affect the hardship provision with borrowers.
The letter to bank executives comes as a slowdown in parts of the economy has led to an increase in job losses, and as some of the banks work through the impact of natural disasters on their balance sheets.
Despite the warnings banks are this week most likely to confirm that they are on track to deliver over A$24 billion in annual earnings this year.
The Sydney Morning Herald reported that the regulator has seen cases of banks wiping the slate clean when it comes to hardship provisions to stop their debt collection processes being activated.
''While this practice may be reasonable from an operational perspective, it can obscure prudent internal and regulatory reporting of past-due and impaired loans,'' APRA said in a letter to bank executives sent over the weekend.
APRA emphasised its comments related to the reporting of loans and should not affect the hardship provision with borrowers.
The letter to bank executives comes as a slowdown in parts of the economy has led to an increase in job losses, and as some of the banks work through the impact of natural disasters on their balance sheets.
Despite the warnings banks are this week most likely to confirm that they are on track to deliver over A$24 billion in annual earnings this year.
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