At the end of last week the Australian Prudential Regulation Authority (APRA) appeared before the Federal Parliament’s Standing Committee on Economics.
SOME OF THE COMMENTARY IS DETAILED BELOW:
In his opening statement, APRA’s Chairman Wayne Byres provided some further information about APRA’s sound lending practices benchmark’s that were relayed to all Australian ADIs in December.
‘We have written to all authorised deposit-taking institutions (or ADIs) encouraging them to maintain sound lending standards, and identified some benchmarks that APRA supervisors will be using in deciding whether additional supervisory action – such as higher capital requirements – might be warranted.’
‘I would like to emphasise that, in alerting ADIs to our concerns in this area, we are seeking to ensure emerging risks and imbalances do not get out of hand. We are not targeting house price levels – as I have said elsewhere, that is beyond our mandate – and we are not at this point asking banks to materially reduce their lending. We have identified some areas where we have set benchmarks that we think will be useful indicators of where risk could be building, and in doing so, will help reinforce sound lending practices amongst all ADIs. We are currently assessing the plans and practices of individual ADIs and, over the next month or so, will be considering whether any supervisory action is needed. So far, our discussions with the major lenders have suggested they recognise it is in everyone’s interests for sound lending standards to be maintained. But we shall see – we are ready to take further action if needed.’
The most interesting comments were that the intent of these guidelines is not to specifically target house prices, rather APRA is focusing on reducing riskier lending practices.
They also seemingly once again highlighted their preferred mechanism for macro-prudential policies being higher capital requirements.
The Chairman once again reiterated that they will take action if the guidelines aren’t followed.
For a regulator that generally likes to operate behind closed doors there have now been a number of very public warnings to the ADIs.
We would suspect that while the warnings have been very public, any additional supervisory action is most likely to be between the regulator and individual ADI’s rather than publicly proclaimed.
CoreLogic RP Data was tracking 2,896 auctions over the past week, which was higher than the 2,556 auctions held over the previous week.
The weighted average clearance rate across the capital cities was 75.9%; the fourth consecutive week where the combined capitals clearance rate has been 74% or higher.
Although auction clearance rates remain elevated, they did fall slightly from 77.2% the previous week.
The largest auction market, Melbourne, saw 1,333 auctions held last week with a clearance rate of 77.1%, down from 78.0% over the previous week.
In Sydney there were 1,006 auctions with a clearance rate of 84.8%.
Sydney auction clearance rates have been above 80% for 7 successive weeks since the Reserve Bank cut official interest rates by 25 basis points at the start of February 2014.