ASB CEO Vittoria Shortt chose the release of the CBA-subsidiary’s results to ramp up the pressure on the New Zealand government to relax its “prescriptive” new lending rules as an apparent credit crunch hits kiwi borrowers.
The rules are similar to the ASIC-driven ones that have been upended in Australia by the ‘Shiraz and Wagyu’ case.
Since the passing of amendments to the Credit Contracts and Consumer Finance Act (CCCFA) at the start of December last year there has been a flood of news stories about people being turned down for mortgages or having their pre-approvals withdrawn. Some borrowers report cutting back on food or using cash for purchases such as takeaways, pet care or haircuts.
The new rules include more detailed standards for lenders assessing the affordability and suitability of loans, additional record-keeping requirements on lenders and duties on their directors and senior managers as well as responsible advertising standards and greater transparency and access to redress before debt collection starts.
The media coverage and concern the banks were adopting too hard a line with the guidelines last month prompted the government to bring forward an investigation by the Council of Financial Regulators (COFR) into the impact of the legislative changes.
"It may also be that in the initial weeks of implementing the new CCCFA requirements there has been a decision to unduly err on the side of caution,” said Commerce and Consumer Affairs Minister David Clark in January.
The inquiry is expected to provide its initial advice as early as the next couple of weeks, followed by further advice in April.
Yesterday Shortt said ASB had rejected about 7 per cent of home loan applicants who would have qualified before new lending regulations were introduced, reports Stuff. Her comments follow claims by ANZ New Zealand chief executive Antonia Watson that the prescriptive new rules caused a 6 per cent decline in approved applications at ANZ.
Shortt, Watson and other New Zealand banking executives met with minister Clark last week to discuss the impact of the regulations, and Shortt said she was optimistic changes could be made to ease the credit crunch and allow the bank to assist customers it was willing to lend to, but had not.
“My read is people can see there have been unintended consequences,” she said.
However, ASB still grew its home lending by 8 per cent in the six months to 31 December 2021. Business lending was up 10 per cent when compared with the first half of FY21. Its home loan share fell only slightly, from 21.8 per cent to 21.4 per cent.
And RBNZ figures show there was still $7.9b of new lending by New Zealand lenders in December, which was down 13 per cent from November but in line with the $8.3b average for the rest of 2021. New first home buyer lending of $1.56b was down just 10 per cent from November and in line with the monthly average for 2021.