APRA keen to avoid home loan and deposit intervention

The  Australian Prudential Regulation Authority's chairman, Wayne Byres, appeared before the Senate Standing Committee on Economics yesterday and raised "two issues of current interest", namely the prudential regulator's stance on intervention in the mortgage market and the publication of MySuper statistics

First-up, Byres took umbrage at some media comments stemming from the Reserve Bank's Financial Stability Review. Byres asserted that comments on the need for sound lending practices were wrongly interpreted as indicating Australia was "on the verge of macroprudential interventions", such as hard limits on certain types of loans, or minimum deposit requirements for borrowers.

Countering this, he was keen to let the committee know that APRA generally avoided outright prohibitions on activities where possible. He said the agency's philosophy was to encourage institutions to set their own appetite for risk, while creating incentives for prudent lending.

"That is not to say that we would never use the sorts of tools being employed elsewhere, but they are unlikely to be the first ones we reach for," Byres said.

He added that lifting the levels of "supervisory intensity and regulatory requirements" in the face of higher risk activity in the housing market "is not new" to APRA.

"We see it as standard supervision. In the period from 2002 to 2004, for example, there was a similarly strong run-up in house prices, and similar concerns about higher risk lending and emerging imbalances. We're doing now what we did then: collecting additional information, counselling the more aggressive lenders, and seeking assurances from Boards of our lenders that they are actively monitoring lending standards."

Byres told the Committee that APRA "is about to finalise guidance" on sound mortgage lending practice, following a "comprehensive stress test" of the largest lenders.

He also noted that APRA's initial MySuper quarterly statistics were published earlier this month, covering the four quarters ending September 2013 to June 2014, as "part of a much broader and richer suite of superannuation publications that APRA is implementing."

"For MySuper products in particular, it will be some time yet before there is sufficient information available to assess the impact of the reforms on members' outcomes," he said.