(9 November 2009 – Australia) The Australian Bankers’ Association has said that the Australian Prudential Regulatory Authority’s (APRA) common definition of Income Producing Real Estate (IPRE) does not translate into expanded issuance or lower premiums by banks.The new definition for IPRE outlines the criteria for what constitutes a specialised property loan.
The Australia Financial Review published a story indicating that the IPRE’s definition will now mean banks will be able to materially reduce capital held against loans and has set a expectation that banks will then be able to expand issuance of these sorts of loans or charge lower premiums.
The ABA has said that they have finalised the additional criteria for what constitutes a specialised property loan, but this does not imply any significant easing in capital requirements and in some circumstances the criteria may lead to higher capital requirements.