Regulatory pressure on Australia`s largest banks has risen, driven by an investigation by the Royal Australian Commission.
Recently, banks said the move had made it harder for consumers and businesses to get loans, prompting a flood of customers into unregulated "shadow banks", exacerbating the problem.
In a recent interim survey, the Royal Australian Commission called on the federal government to amend its laws to ensure that banks take on relatively more responsibility and that responsible loans are made available. In this regard, including Western Pacific Bank and the Federal Bank of Australia and other lending institutions are opposed.
Under current law, banks must "reasonably inquire" about customers` financial position before making loans, and ensure that credit lines apply to applicants. On the contrary, enterprise loan is not restricted by the law of responsible loan, and belongs to the scope of industry code of conduct.
Banks say they have taken steps to improve customer review. But further legal restrictions on the banking sector are bound to lead to a large flow of customers to unregulated shadow banking channels, which in turn backfire.
In a filing, the Federal Bank of Australia said: "if the borrower`s responsibility is shifted too much to the lender, the threshold for bank lending and the corresponding costs will be significantly higher. In other words, the move has undoubtedly pushed a large number of clients to unregulated financial institutions, shadow banks. "
Western Pacific said banks were fully aware of the importance of responsible loans, but lenders ultimately relied on the information provided by borrowers for corresponding loan approvals. A Western Pacific spokesman said: "the excessive bias of responsibility towards lenders is bound to break the balance between the responsibilities and obligations of lenders and has a potentially negative impact on the cost and availability of loans."
In addition to disagreeing to amend existing responsible lending laws, Australia`s leading banks also object to the Royal Commission`s decision to extend the Consumer Credit Protection Act to cover corporate customers. West Pacific, for example, retorted that the move would only change the number and nature of eligible SME customers.
In addition, a number of banks, including ANZ Bank, Commonwealth Bank and National Bank of Australia, rebutted after the Royal Commission questioned (HEM), the bank`s current measure of household spending, as a benchmark for credit line reviews.
"the signal from the banking giant is clear that further steps by the Royal Commission will lead to further tightening of credit and, in turn, to a further downward trend in home prices across Australia," he said.
In addition, with regard to the banking pay incentive system, which has also been criticized by the Royal Commission:
On the one hand, Australia`s major banks have acknowledged that compensation incentives have been a factor in previous scandals;
On the other hand, major banks say the problem can be addressed by reforming incentive design, strengthening customer service and risk management.
Among them, ANZ said: "past pay incentives for overemphasis on performance have led to excessive attention to performance in the short term."
At the same time, both ANZ and ANB have expressed their willingness to engage in-depth discussions with industry to reform the compensation and reward system while increasing its transparency.
