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Banks may have to cut back on loans: RBA

by Staff Reporter7 minute read
The Adviser

RBA officials yesterday warned that domestic banks might have to restrict the amount of money they lend to customers.

In a speech on the Australian bond market, RBA assistant governor Guy Debelle said that deteriorating credit market conditions may force banks to rein in their loan provisions.

“Because the banks have been able to maintain their pre-crisis pace of issuance, they have not curtailed their provision of credit, beyond charging a higher price,” Mr Debelle said.

“However, were the banks to experience  difficulties in continuing to access funding, one might see a quantitative constraint placed on credit provision in addition to that provided by the price,” he said.

The words of RBA’s assistant governor Malcolm Edey echoed similar thoughts to Mr Debelle at a business conference in Sydney yesterday.

“Banks have been responding to the higher funding costs by increasing their lending rates,” Mr Edey said.

“They’ve also tightened their lending standards to risky borrowers, and that process may have further to go.”

Published: 06-03-08

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