ANZ's chief executive officer confirms that lending will likely slow further off the back of tighter expense requirements recommended by the royal commission.
Following the announcement of ANZ’s 2018 half-year (HY18) financial results, Mr Elliott warned that borrowers may experience greater difficulties obtaining a loan if banks introduce tighter household expense measures (HEM) recommended by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“It’s likely, we don’t know yet, but it’s likely that from what we’ve read in the papers, and from what the royal commission may recommend, is that we tighten up those processes, that we ask more questions, we ask for more documents, we get more history, more bank statements, more proof of expenses,” the CEO said.
“That will by necessity slow [lending] down, I imagine. Most people’s ability to get a loan, [have] to be more prepared, [and] have to go and find one, two, [or] three years of documents.
“[Banks are] going to be much more — and quite rightly — robust in making sure we’ve got everything, so yes, it will slow down and it’ll be a little bit tougher.”
The ANZ chief added that the big four bank would be more inclined to deny finance to borrowers on “the margins”.
“At the margins, it’ll be more likely that we just say ‘no’, where perhaps in the past, on balance, we would have said, ‘Yes, we know you’re a good customer. I don’t have exactly all those documents perfect, but I’ll make a judgement’. I think that’s less likely in the future,” Mr Elliott continued.
Mr Elliott acknowledged that questions raised concerning ANZ’s processes are legitimate, but he insisted that the bank was complying with its responsible lending obligations.
The ANZ CEO noted the importance of the HEM benchmark but said that such a measure is not without its faults.
“Obviously, there’s a big question about the use of HEM,” the CEO added.
“[We] know that people are poor financial historians; all of us, myself included, struggle to remember exactly what our monthly expenses are, for example.
“Having a benchmark that’s reliable and robust is really useful.
“Is there a possibility it gets overused? Yes, clearly.”
Westpac recently updated its expense guidelines, requiring borrowers to provide documentation at an “itemised and granular level” across 13 different categories and include expenses that will continue after settlement as well as debts with other institutions.
[Related: Mortgage broking needs to reform: ANZ CEO]