Double-digit credit growth unlikely to return

by AB18 Dec 2013
Market conditions seen prior to the GFC are unlikely to return, says Westpac group treasurer Curt Zuber.

Speaking at the Australian Finance and Banking Conference held in Sydney yesterday, Zuber signalled the strong implications upcoming regulation changes are likely to have on credit markets, reported Banking Day.

"We won't see the days of 12% or 13% credit growth again," said Zuber. "New rules will impose constraints on maturity transformation."

Under the new Basel III liquidity coverage ratio, due to take effect in 2015, requires banks to hold sufficient high quality liquid assets to allow them to operate for 30 days without access to financial markets.

RBA deputy governor, financial markets, Guy Debelle, said there has been some increase in banks’ charges for providing liquidity, but said he expected more repricing was still to come.

Liquidity was under-priced prior to 2007, said Debelle, which saw banks undertaking too much long-term lending that they funded with short-term wholesale debt. 

The new rules will affect the pricing of loans as well as deposits, with a particular impact on contingent facilities such as lines of credit, said Debelle.