Banks must come to terms with "life in the slow lane", APRA has warned.
In the regulator's annual report, APRA chair John Laker has warned banks that they will have to readjust their expectations for growth in light of weakened consumer credit demand. Laker remarked that consumer wariness was likely to continue in the face of global economic turmoil.
"The cautious attitude of households and businesses in Australia, which will be reinforced by recent global developments, will very likely deny ADIs the strong volume growth that supporter a sustained period of profit increases before the crisis," Laker said.
Laker warned that banks and shareholders alike would have to adjust to lower returns on equity. He said banks could find themselves tempted to "chase unrealistic expectations by assuming more risk" through relaxing credit standards or aggressively cutting costs.
"Those temptations must be resisted in favour of more measured strategic ambitions," Laker said.
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