The Australian Prudential Regulation Authority
(APRA) has promised to continue its focus on greater financial prudence for residential and commercial mortgage lending.
In its 15/16 Annual Report
released yesterday (17 October), APRA reported that its efforts had managed to partially scale back residential lending trends in Australia.
“More recently, housing lending has shown signs of some moderation, in part due to measures APRA has taken to ensure prudent lending standards and restrain the more speculative elements of growth in this sector.”
These changes commenced in December 2014 when the regulator wrote to all authorised deposit-taking institutions (ADIs) and identified areas of concern including risk profiles, investor lending and serviceability assessments.
Supervisory actions undertaken by APRA included the following, according to the annual report:
- Improving mortgage underwriting standards and serviceability criteria
- Conducting a Hypothetical Borrower Exercise to assess and summarise the results of underwriting improvements undertaken since December 2014
- Monitoring how ADIs are moderating investor lending, ensuring commitments such as quantitative targets and timing are adhered to
“Although many of APRA’s initial objectives in this work have been met, sound mortgage lending standards will continue to be an area of focus in the coming year.”
In the second half of 2015, the regulator moved onto reviewing commercial lending practices.
“This work has a number of complementary components: a significant data collection focusing on portfolio-wide metrics for recent loan organisations, a review of documented underwriting standards, on-site discussions with relevant ADIs, and a detailed review of a sample of transactions.”
According to the report, this phase will be completed by the end of the year after which the regulator will produce and publish more detailed commercial lending guidelines.
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