IPA cautious about regulation of deposit activity

Institute of Public Accountants chief executive Andrew Conway said that while APRA’s removal of the 10 per cent speed-limit on investor lending growth may be good for individuals and small businesses, the IPA was cautious about the ability of certain ADI boards to oversee and control the activities of ADIs.

He also questioned the commitment of certain ADIs to strengthen some of their practices in line with prudent policies.

On the other hand, Mr Conway added that not all ADIs “should be tarred with the same brush”, stressing that borrowers need to be prudent as well, and ensure they are being responsible borrowers and not just relying on responsible lending practices of banks and other ADIs.

“If a loan was not appropriate or serviceable before then it won’t be appropriate or serviceable now just because APRA is removing the benchmark,” she said.

“The IPA welcomes the intention of replacing the benchmark with higher, permanent standards, even though work still needs to be done by ADIs."

APRA introduced the 10 per cent benchmark on investor loan growth in 2014 as a temporary measure to reduce higher-risk lending and improve practices.

Chairman Wayne Byres said the temporary benchmark “has served its purpose”, however the environment “remains one of heightened risk”.

“There are still some practices that need to be further strengthened. APRA is therefore seeking assurances from ADI boards that they will maintain a firm grip on the prudence of both policies and practices,” Mr Byres said.

According to APRA, ADI boards will be expected to confirm that lending has been below the investor loan growth benchmark for at least the past six months.

In addition, they must assure APRA that lending policies meet their guidance on serviceability and will be strengthened where necessary.