Focusing on Increasing Risks in Housing Market APRA Ordered Major Banks to Raise Capital
Seeing the rise in risks of the housing market Australia, APRA take a step towards this by ordering the major banks i.e. Westpac, CBA, NAB, ANZ and Macquarie Bank to increase the amount of capital required for their residential mortgage exposures, meaning they will have to retain billions of dollars that would otherwise have gone out in home loans.
At this a leading bank analyst commented that, these changes in lending rules for home loans Australia could push up rates by 0.65pc. As a result is will lead to more expensive mortgages and reduced mortgage volumes.
According to APRA’s most recent banking statistics, the five banks in question made 85.0 per cent of all owner-occupied loans in May and 86.4 per cent of all investor loans.
This regulatory change will therefore “enhance the resilience” of those banks and the broader financial system, APRA said.
This strategy is only applicable to five major banks that use IRB approach to credit risk, whereas other Australian lenders use a more conservative system, known as standardised risk weighting.
APRA said, “This new rule is a temporary measure given that the Basel Committee has yet to finalise the relationship between the two credit risk systems”.
APRA added, “Further changes to IRB mortgage risk weights could therefore be made, although that would be unlikely to happen in 2015”.
News Post: http://www.theadviser.com.au/breaking-news/32606-apra-reins-in-mortgage-lending-by-banks