EVOLUTION OF BANKING

Comprehensive Credit Reporting is a must
There’s a strong implication in the Report that, notwithstanding the transitional challenges to share positive credit reporting data (which
are recognised), unless the industry itself embraces sharing of positive data by 2017, there is a real likelihood their doing so will be
mandated by legislation. The Report acknowledges that the consumer benefit of the sharing of positive data is clear, including in increased
competition between competitors. Early adopters will reap more benefits but these will even out as more participate and ultimately, positive
data sharing will provide net benefits to all CPs with better credit decisioning based on the additional customer insights gained. Murray
views favourably the submissions generally support expanding CCR data with more data fields – particularly account balances. However,
additional data fields would have to be balanced against privacy concerns, and would require amendment of the Privacy Act.
Clearly there is much still to be sorted from the Inquiry, with submissions being accepted up until 31 March 2015, and government
determinations probably not going to be finalised until at least mid-2015. The message is clear for industry participants however – proactive
involvement in generating change in line with the determinations of the report as the focus now shifts from the conduct of the Financial
System Inquiry to Government and regulator involvement in framing outcomes.
APRA reinforces sound lending practices
The Australian Prudential Regulation Authority recently released a final prudential practice guide for authorised deposit-taking
institutions (ADIs) on sound risk management practices for residential mortgage lending. Prudential Practice Guide APG 223
Residential mortgage lending (APG 223) summarises APRA’s expectations for good residential lending practices. It does not create
any new prudential requirements for ADIs but includes guidance on addressing housing credit risk within an ADI’s risk management
framework, applying sound loan origination criteria and appropriate security valuation methods, managing hardship loans and
establishing a robust stress-testing framework.
APRA Chairman Wayne Byres notes that residential mortgages constitute the largest credit exposure in the Australian banking
system and developments in the housing market have been a significant area of supervisory focus for APRA over much of the past
decade.
‘Housing lending has historically demonstrated a low and stable risk profile compared with other lending exposures in
Australia. However, for some time APRA has seen increasing evidence of residential mortgage lending with higher risk
characteristics by Australian ADIs.’
ASIC continues its focus on responsible lending obligations
The Australian Securities and Investments Commission (ASIC) released in November 2014 an updated version of its guidance on
responsible lending obligations – Regulatory Guide 209 Credit licensing: Responsible lending conduct (RG 209). ADIs need to consider
this and other regulatory guidance when engaging in mortgage lending.
14 | The Evolution of Banking and Financial Services