New proposals seek full transparency from banks on lending

New proposals seek full transparency from banks on lending
Date of Publication: Thursday, 26 July 2012 12:25

Following the recent implementation of a host of credit card reforms to protect consumers and increase transparency, attention is now turning to reforms in the market for home loans.


Under audacious new proposals fronted by Financial Services Minister Bill Shorten, homeowners would be able to find out an array of details from banks about their home loan lending practices.


Mr Shorten promoted a system similar to the US, where the American Community Reinvestment Act forces banks to loan to local areas.


Banks would have to reveal customer satisfaction data, how much they lend to people in different areas, the rates they are charging, and which areas they are avoiding.


Mr Shorten expressed concerns that customers were occasionally being ignored because of where they lived.


Successful Australian banks should invest in jobs in suburbs and declining sectors, he said, rather than concentrating on regions sustained by the mining boom.


He stopped short of demanding legislation to make banks improve their lending performance, but said that transparency between different regions should improve.


Banking officials expressed concerns about such proposals, however, suggesting that forcing banks to lend against their own standards of prudence could lead to a mounting tide of bad credit.


Steven Munchenberg, CEO of the Australian Bankers’ Association, even suggested that it was the prevalence of such practice in America that initiated the global financial crisis.


He described the current mortgage lending market at fiercely competitive, and warned against upsetting the balance of banks operating as strong businesses.


"Banks also have a responsibility to lend responsibly and should not be pressured by government to do otherwise", he said.


Bret Clement

Thursday, 26 July 2012 12:25
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