Mortgage sector getting stronger, but more work required

Mortgage sector getting stronger, but more work required

online
18 September 2015 by Huntley Mitchell 0 comments

Australia’s banks have been told they need “more than just plenty of capital” to be "unquestionably strong" players in the housing market.

While the capital position of the country’s mortgage lenders is an important measure of their strength, a broader perspective needs to be taken, according to Wayne Byres, chairman of APRA, Australia’s prudential banking regulator.

"It’s important we don’t lose sight of the fact that an unquestionably strong bank requires more than just plenty of capital. In banking, asset quality, liquidity and funding, earnings and management quality are also highly relevant to financial strength," he said.

“If a bank is weak in these areas, a strong capital position won’t last long. What is ‘unquestionably strong’, therefore, needs to be viewed in the context of the other risks to which a bank is exposed and the environment in which it operates.”

A bank’s ability to handle a period of severe adversity is another key consideration in demonstrating whether or not a bank is ‘unquestionably strong’, according to Mr Byres.

Mr Byres said the financial health and resilience of the banking sector has improved – but added that it is unclear how much has been due to regulation and how much due to more prudent management or market pressure.

“Regardless, the banking sector has been able to adjust and respond to the changes in the regulatory framework, and the broader financial environment, in an orderly fashion,” he said.

“That said, there are still some challenges and risks to grapple with, a few more regulatory changes in the pipeline, and the environment will inevitably evolve further.”

Mr Byres’ comments come as Australia’s major banks look to strengthen their mortgage books through a series of capital raisings.

Last month, ANZ and Commonwealth Bank announced plans to raise $2.5 billion and $3 billion respectively through retail shareholders. However, recent volatility in financial markets meant that Commonwealth Bank was only able to raise $1.5 billion.

NAB announced a $5.5 billion capital raising in May and Westpac raised $2 billion in the same month through its dividend reinvestment plan.

[Related: APRA issues warning on home lending]

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2016

With a combined sales volume of $13 billion in 2016, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
William Phillips on how agents can expand their database and grow their business

Get up close and personal with the best real estate sales agents in Australia in Secrets of the Top 100 Agents. ...

View all podcasts

Are dodgy agents being punished enough?

Yes (8.6%)
No (55%)
Only in some states (2.3%)
Not all dodgy agents are being found out (34.1%)

Total votes: 220
The voting for this poll has ended on: April 15, 2017
upcoming events
REB Awards
Sydney The Event Centre 12 Sep
REB Awards
Sydney The Event Centre 12 Sep
Melbourne The Event Centre 14 Oct
Brisbane The Event Centre 18 Dec
View all events
Do you have an industry update?