Australia Banks Face Lending Rules Review After Misconduct Probe
(Bloomberg) -- Australia’s securities regulator will review its guidance on bank lending standards, including whether lenders should take more steps to verify borrowers’ income and expenses.
The move comes after an inquiry into misconduct in the nation’s financial industry heard banks had failed to comply with responsible lending laws, particularly by relying on spending benchmarks that tended to underestimate a potential borrowers’ expenditure.
Under the proposed changes, banks should take more steps to verify expenses such as rent, school fees, utility bills and entertainment services like Netflix and Spotify, the Australian Securities and Investments Commission said in a consultation paper released Thursday.
While banks have already tightened loan requirements -- cited as one of the main reasons behind the rapid decline in home prices -- even tougher standards could deal a further blow to the soggy housing market. Nationwide home prices have fallen 5.6 percent in the past 12 months, according to CoreLogic Inc., the steepest decline since 1983.
While the Royal Commission’s final report into misconduct didn’t recommend any changes to lending rules, it did call for banks to “apply the law as it stands.”
Banks and other key stakeholders have three months to make submissions on the proposed changes, ASIC said.
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