RBA says bank inquiry sensible on credit

Megan Neil
(Australian Associated Press)

 

The banking royal commission’s recommendations related to the provision of credit are balanced and sensible, the Reserve Bank of Australia says.

RBA governor Philip Lowe says the central bank has been paying close attention to uncertainty over the supply of credit after a tightening of lending standards over recent years.

The royal commission’s recommendations are not expected to worsen the availability of credit or make it even harder to get a loan, analysts say.

Mr Lowe welcomed the final report, which was released on Monday, and the government’s response.

“The commission’s recommendations that bear on credit provision are balanced and sensible, and should remove some uncertainty,” he told the National Press Club on Wednesday.

“I also welcome the commission’s focus on: the importance of service – as opposed to sales – in the financial sector; the necessity of dealing properly with conflict of interest issues; and the importance of accountability when things go wrong.”

Mr Lowe said the tightening of credit standards over recent years was needed, but the right balance had to be struck.

“As lenders have sought to find that balance, we have had some concerns that the pendulum may have swung too far the other way, especially for small business.”

Royal commissioner Kenneth Hayne QC made it clear he expected banks to do more to verify customers’ income and their actual living expenses in assessing loans amid an over-reliance on using a household expenditure measure benchmark.

But he decided not to tighten lending laws or impose a cap or ban on the use of the benchmark, pointing to the steps banks have taken to strengthen their home lending practices and reduce their reliance on the HEM.

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