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Bank regulations threaten mortgage holders

Staff Reporter 3 minute read

Tighter banking regulations could force homeowners and businesses to pay higher interest rates.

According to an article in The Australian Financial Review, the RBA’s governor Glenn Stevens said borrowers could expect loan costs to climb further as measures were taken to internationally reduce financial market risk taking and increase protections in the system.

“On the assumption that most of these regulatory changes go ahead, one effect will presumably be to make the process of financial intermediation more costly,” Mr Stevens said.

“Customers of financial institutions – depositors and borrowers – will pay via higher spreads between what lenders pay for funds and what they charge for loans.”

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Mr Stevens’ comments come after the Australian Prudential Regulation Authority announced its plans to tighten bank liquidity standards, potentially costing the nation’s four biggest lenders up to $1.76 billion.

According to a research paper by Investment Bank Nomura Holdings, the new liquidity standards would have a significant impact on bank profitability.

Bank regulations threaten mortgage holders
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