While the market may assume that this change in policy would fuel loan growth and boost bank profits, no bank or lending institution would start to compromise lending standards to take on more risks when the economic environment is still fraught with uncertainty and difficulties just because they are now allowed to do so.
Making the bubble bigger is what we're got at doing.
But who cares right? Why think long term when you are struggling to make ends meet in the short term.
But it would IMO only make marginal difference. Just like Jobkeeper was designed to retain employment, it is good but its benefits (of retaining employees) not delivering the extent to which it was intended.
At the end of the day, businesses will make decision based on what works for themselves, in a free market. You can incentivise them to a degree, as they say you can lead the horses to the pond but you can't force them to drink.
Bank shares surged on Friday on the back of reforms to the credit act to strip the corporate regulator of policing responsible lending.
Banks welcomed the changes, saying they would reduce the burden of regulation, cut red tape for consumers and allow them to approve loan more quickly. They will also help small businesses access credit, supporting employment as the economy recovers from the crisis. Westpac said.
The Property Council of Australia endorsed the moves announced by Treasurer Josh Frydenberg on Friday, saying they would help more Australians buy or invest in property while improving housing supply and affordability.
Mortgage brokers said the changes could reduce borrowing costs by cutting the time it took to originate a loan, by removing unnecessary paperwork and processes.
Non-bank lenders said the policy could help them make credit decisions faster with fewer manual processes, lifting competition in the market by encouraging switching.
Westpac shares were catapulted 7.2 per cent to $17.54 just before midday on Friday. National Australia Bank was up more than 6 per cent at $18.26, ANZ up more than 5 per cent at $17.76, and Commonwealth Bank was trading almost 3.5 per cent higher at $66.49 at 11:30am AEST.
Westpac CEO Peter King, whose bank prevailed in a fight with ASIC in the Federal Court over interpretations of the laws in the "wagyu and shiraz" case, said the changes would allow it to get loans to customers faster.
He also said they would support lending to small business. Westpac executives have previously pointed to excessive red tape and "micro-regulation" cutting access to SME credit.
“This is a significant government initiative that will reduce red tape for consumers seeking a loan and importantly speed up the process for customers to obtain approval for a loan," Mr King said.
“These enhancements would enable us to assess loan applications across specific lending products rather than a ‘one-size-fits-all' approach.
"We will be able to streamline our processes, making it an easier and simpler process for customers," he said.
"It will also play an important role in ensuring access to credit for businesses wanting to invest and grow. SME businesses drive employment and this is very important for economic recovery."
A spokesman for CBA said: “We welcome the government’s announcement today about reforming the way that lending arrangements are regulated.
"We will work through the detail of the proposals but as a principle we support any attempts to reduce regulatory burden while continuing to ensure that consumers are protected.”
Australian Banking Association CEO Anna Bligh said banks remain committed to strong protections for consumers.
"It is important to ensure that these changes strike the right balance between maintaining strong consumer protections while providing credit into the economy at a critical time,” Ms Bligh said.
“Banks look forward to working with the government to ensure the legislation works for both customers and the broader economy.
“Australian banks understand their role in supporting customers and rebuilding the economy. Ensuring the flow of credit to families and businesses, with the right customer protections, is paramount."
Mr King added: “It is in our interest to only lend to customers who are in a position to meet their financial obligations. The government proposal strikes a good balance between reducing regulatory burden on credit providers while ensuring we have rigorous credit processes in place.”
The Property Council said the changes would lift investment in housing. Housing developers had been worried about the impacts the laws were having to restrict credit to buyers into new housing projects.
“A competitive and well-functioning credit market, subject to prudent regulatory oversight, will help more Australians buy or invest in property, improving housing supply and affordability and support jobs and economic growth,” said its chief executive, Ken Morrison.
“The measures announced by the Treasurer today appear focused on getting the balance right between a fit-for-purpose framework which supports the flow of credit with regulatory oversight and consumer protections in place.
“Ensuring that Australians who want to buy a home, invest in property or start a business can access credit will be vital to supporting economic recovery and growth following COVID-19." 'Not fit for purpose'
The Mortgage & Finance Association of Australian CEO Mike Felton said the responsible lending regime was no longer fit for purpose and often created an unworkable situation for borrowers, lenders and brokers.
“The evolution of the responsible lending regime, combined with post Royal Commission uncertainty on how to effectively comply, led to unacceptable growth in credit application processing times, and swamped customers in unnecessary paperwork and processes," he said.
“These changes will result in faster turnaround times for qualified borrowers removing onerous processes which should lower the cost of lending and borrowing money."
He said the new best interests duty for consumers was "a higher duty
duty than responsible lending" and would protect vulnerable customers.
Customer Owned Banking Association chief executive Michael Lawrence said the government "is right to take decisive action to promote lending at a time of great uncertainty and the biggest peacetime economic contraction since the 1930s". Pro-competitive
Regional banks and non-banks also threw their support behind the wind-back.
Clive van Horen, Suncorp Bank chief executive, described the changes as "a win for Australian consumers and businesses, who will benefit from greater competition between lenders and stronger protections from poor outcomes and predatory lenders".
“The Treasurer’s reforms to level the regulatory playing field will also stimulate Australia’s recovery from COVID-19 and will lift confidence," he said.
"These welcome changes will help Australian households and businesses get access to finance, enabling them to grow their businesses and create new jobs."
Non-bank lenders were also up-beat, saying the moves could help facilitate switching.
Anthony Nantes, CEO of ASX-listed Wisr, said the decision showed the government is "actively thinking about this sector and we agree this will provide consumers with more choice, and encourage them to seek out a better deal by reducing the barriers in switching credit providers."
Daniel Foggo, the CEO of Plenti, which listed on the ASX this week, said the responsible lending laws had "created extraordinary inefficiency for new lenders, where often in order attempt to comply, credit processes were required to be incredibly manual.
"Technology will now become the key differentiator between lenders. Without responsible lending slowing credit decisions, consumers will gain access to numerous faster and simpler credit options beyond their banks."
Brokers agreed the changes would support competition.
“Ultimately, this is about access to credit for all Australians," said Mr Felton. "These changes should help improve competition, make it easier for consumers to switch lenders, and enhance access to credit for small businesses.”
