No room for US lending ideas: ABA

No room for US lending ideas: ABA

07 August 2012 by Staff Reporter 1 comments

Staff Reporter

The Australian Bankers’ Association has slammed the government’s idea of adopting certain American lending practices.

Last week, the federal government’s financial services minister Bill Shorten said Australia would do well to implement lending practices similar to those being used in America.

Currently, US banks are compelled to provide loans to communities, including low income earners who live in that community.

While Mr Shorten said he did not see the need for the US-style laws, he did say he would like to see the banks provide information on how much they lend to people in different areas of capital cities, the interest rates they charge and other information.

However, this idea has since been slammed by Australian Bankers’ Association chief executive Steven Münchenberg who said Australia needs to be very careful when adopting ideas from the US where lenders made “bad loans, where the sub-prime crisis resulted and where the economy is still reeling from the effects of the GFC”.

“We need to be very cautious about any measures from the Australian government which puts pressure on banks to lend where they would not otherwise do so,” he said.

“Banks do not discriminate against lending to any suburb – banks make loans to those customers who can afford to repay.”

“If a consumer fails a bank’s credit assessment when applying for a loan, then he or she will not be supplied a loan. This is sound risk management by banks and ensures the consumer is not supplied a loan that they will have difficulty in repaying, causing the consumer financial stress.”

“Futhermore, there are Australian laws which require responsible lending which were put in place by this government. Also, there are other laws being put in place which will require banks to hold more capital. You can’t have it both ways – trying to limit lending with one hand and trying to increase it with the other.”

“It is also my understanding that at no time has Minister Shorten discussed with the banking industry these American ideas or what he describes as a lack of credit being supplied to the Australian community.”

According to Mr Münchenberg, the fact is demand for credit, including mortgages, is down at the moment.

In addition, banks are competing fiercely for fewer customers.

“Banks have an obligation to lend responsibly and should not be pressured by the government to do otherwise,” he said.

Staff Reporter

The Australian Bankers’ Association has slammed the government’s idea of adopting certain American lending practices.

Last week, the federal government’s financial services minister Bill Shorten said Australia would do well to implement lending practices similar to those being used in America.

Currently, US banks are compelled to provide loans to communities, including low income earners who live in that community.

While Mr Shorten said he did not see the need for the US-style laws, he did say he would like to see the banks provide information on how much they lend to people in different areas of capital cities, the interest rates they charge and other information.

However, this idea has since been slammed by Australian Bankers’ Association chief executive Steven Münchenberg who said Australia needs to be very careful when adopting ideas from the US where lenders made “bad loans, where the sub-prime crisis resulted and where the economy is still reeling from the effects of the GFC”.

“We need to be very cautious about any measures from the Australian government which puts pressure on banks to lend where they would not otherwise do so,” he said.

“Banks do not discriminate against lending to any suburb – banks make loans to those customers who can afford to repay.”

“If a consumer fails a bank’s credit assessment when applying for a loan, then he or she will not be supplied a loan. This is sound risk management by banks and ensures the consumer is not supplied a loan that they will have difficulty in repaying, causing the consumer financial stress.”

“Futhermore, there are Australian laws which require responsible lending which were put in place by this government. Also, there are other laws being put in place which will require banks to hold more capital. You can’t have it both ways – trying to limit lending with one hand and trying to increase it with the other.”

“It is also my understanding that at no time has Minister Shorten discussed with the banking industry these American ideas or what he describes as a lack of credit being supplied to the Australian community.”

According to Mr Münchenberg, the fact is demand for credit, including mortgages, is down at the moment.

In addition, banks are competing fiercely for fewer customers.

“Banks have an obligation to lend responsibly and should not be pressured by the government to do otherwise,” he said.

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