Australia’s mutual banks have argued that macro-prudential measures have created reputation and trust issues and impacted relationships with customers and brokers.
In its submission to the Productivity Commission draft report, the Customer Owned Banking Association (COBA) noted that several customer-owned banks were forced to temporarily halt investor lending in order to meet APRA’s requirements.
“Several COBA members have had time ‘out of the market’ due to the risk of breaching macro-prudential limits,” the submission said.
“Customer-owned banks, due to their small size relative to the major banks, are subject to greater volatility in their lending flows. This makes it much more difficult to manage a predictable growth path within the 10 per cent limit.
“Having to temporarily exit the investor lending market has significant impacts on customer and broker relationships.”
According to COBA, new and existing customers are turned away as institutions are unable to provide a product that is part of the standard offering of modern banking institutions.
“For example, an existing borrower with an owner-occupied loan may seek to move both their current loan and new investor loan to another ADI if the current ADI is unable to provide the investor loan,” the association said. “This creates reputation and trust issues.”
While COBA accepts that macro-prudential measures play an important role in managing systemic risk, the association argues that there must be greater consultation with the industry ahead of implementation.