Change in APRA reporting threatens transparency

by Madison Utley02 Sep 2019

The Australian Prudential Regulation Authority (APRA) has released the first edition of its new monthly banking statistics, replacing the old system and introducing changed metrics for data measurement moving forward. 

Financial analyst Martin North has called the new statistics “rubbish” on his Digital Finance Analytics blog, noting that the revised method of capturing data makes it nearly impossible to track trends. 

As such, North said APRA’s new reporting serves as a “series break” to begin a new bracket of data moving forward and distance the figures from the past. 

The altered Monthly Authorised Deposit-taking Institution Statistics (MADIS) for July 2019 included an expanded data set covering domestic and foreign banks, building societies, larger credit unions and other authorised deposit-taking institutions (ADIs).

The data, made public on Friday, revealed a significant shift from owner-occupied to investment housing loans. However, the regulator noted the movement was expected due to a change in the definition of 'owner-occupied.'

According to APRA’s glossary: “Owner-occupied are loans to resident households for the purpose of housing, where the funds are used for a residential property that is occupied or to be occupied by the borrower(s) as their principal place of residence. The principal place of residence means the residential property at which an individual resides for the majority of the year."

An APRA spokesperson explained, “The reference to ‘principle place of residence’ is a new reporting requirement. As such, loans previously reported as owner-occupied are now reported as investment.

“This is only a reporting change, and does not impact other APRA requirements such as capital adequacy.”

According to the MADIS report, the value of owner occupied loans in July fell by 5%, while investment loans rose by 16% and total lending went up more than 2% at $1.72trn. 

The new reporting methods were evidenced most clearly at the major banks, as Westpac showed the largest switch with nearly $40bn disappearing from its owner occupied loan book. 

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“This is meaningless,” said North. “Given the size of the changes, it is impossible to tell what is happening within individual lenders. 

“Frankly this is a joke, and I feel it is designed to hide, not inform.”