Already a subscriber?The pendulum always swings. Community opprobrium about bank lending practices and perceptions of corporate greed imploded spectacularly in the Hayne royal commission six years ago.and a range of other regulations as part of the determination to change the experience of customers and the behaviour of Australia’s highly profitable banks.
“If the bank doesn’t take that punt, doesn’t take the risk, what happens to that borrower?” she told The Australian Financial Review Banking Summit. “They go to the non-bank system where they will pay higher rates and where, if they get into trouble, they are likely to have far less support and protection through regulated hardship programs.
“If I look at the unsecured markets or credit cards, in this stage of a cycle rates have gone up 4 per cent, you would normally see delinquencies go up and they generally come down,” he said. “So what used to be the canary in the coal mine about credit quality has not reacted that way.That means, he says, that a common question from investors at the moment is whether the average impairment loss through the economic cycle has “stepped down”.
That is also shaking the banks’ reliance on using property as security, particularly for small business lending. But although there’s a move away from using property to instead consider other things like business cash flow and invoices, this is only happening slowly., sounds surprisingly sceptical about blaming such reluctance on regulation. Instead, he backs the need for banks to be more active in diversifying what is considered acceptable as a form of collateral.
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Source: FinancialReview - 🏆 2. / 90 Read more »