Aussie Banks Push Back Against Plan For Deeper Credit Checks

In response to plans by regulators to require banks to conduct more detailed credit checks in lieu of depending upon indices, banks in Australia are pushing back. The No. 2 lender, for instance, claims it’s not feasible to make such checks, Reuters reported.

Banks in Australia depend heavily on an index that estimates an average Australian’s minimum living expenses based on levels of income. But the Royal Commission advised that regulators should make sure its use does not take the place of thorough customer checks that comply with the rules for responsible lending.

However, as Westpac Banking Corp said in a submission to the Australian Securities and Investments Commission, “Westpac does not believe that there is significant utility in requiring the verification of living expenses.”

The lender also noted in its submission, “Accurately verifying basic and discretionary living expenses using transactional account data is currently not feasible, and in Westpac’s experience, would be of limited value.”

Three other large banks, which include National Australia Bank, Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ), noted that the benchmark was a crucial portion of the application processes. CBA, which the report said is “the largest,” noted it would lessen its reliance on the measure.

In separate non-consumer lending news from Australia, the government announced last year a new initiative to support small business finance, per reports in November. The government, according to reports at the time, would purchase up to $1.44 billion in small business loans from non-bank lenders to increase the availability of working capital for the nation’s small and medium-sized business (SMBs).

Australia’s Treasurer Josh Frydenberg said in a statement, “Small businesses find it difficult to obtain finance.” He also noted that the government “will invest up to [AUS]$2 billion in the securitization market, providing significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms.”