Australian regulator to consider action on mortgages next month

[SYDNEY] Australia's banking regulator will determine next month whether any bank is breaching sound mortgage-lending practices and consider supervisory action, though any response won't be made public.

The Australian Prudential Regulation Authority is assessing plans and practices of individual banks and the focus is to ensure emerging risks and imbalances are contained, Wayne Byres, chairman of the regulator, told lawmakers in Canberra on Friday.

Regulators including APRA and the Reserve Bank of Australia are working to assess and contain risks from the nation's booming housing market as record-low interest rates spur prices. APRA urged lenders on Dec 9 to limit growth in mortgages for property investors to 10 per cent a year and said it will review lending practices in the three months to March.

"Our discussions with the major lenders have suggested they recognize it is in everyone's interests for sound lending standards to be maintained," Byres said. "But we shall see. We are ready to take further action if needed." Regulators were paying attention to the loan market, given the potential for risk taking, Byres said. "Low interest rates, high household debt, subdued income growth, rising unemployment, very high house prices, very competitive housing lending - there's a lot of potential for risk," he said.

APRA will impose extra capital requirements on higher-risk lenders and any burdens won't be a surprise to them, Byres said. It won't advertise any requirement for higher capital imposed on any individual bank to the broader market and doesn't usually inform other regulators of such action, he said, adding that this was a "very effective way" of dealing with the issue.

BLOOMBERG