Banks told: Be ethical and lend responsibly
BANKS have been urged to lend responsibly and ethically as property markets in Melbourne and Sydney appear increasingly “bubbly”, the head of the nation’s corporate watchdog has warned.
And the rapid technological change sweeping the financial service industry means regulators will need to be increasingly vigilant to prevent cyber attacks on personal data, Australian Securities and Investments Commission chairman Greg Medcraft said.
Mr Medcraft said prospective homebuyers relied on a bank’s judgment of their ability to meet loan repayments, “even though they (the homebuyer) may have reservations about their true ability to pay”.
“(A bank) shouldn’t just be relying on the person to take on the debt: they have a real obligation – not just a legal obligation but almost an ethical obligation – not to put people in over their heads,” he said.
Mr Medcraft told the regulator’s annual forum in Sydney yesterday that he was concerned affordability had become stretched in the nation’s two biggest capital cities as prices surged beyond historic internationally recognised affordability levels. Latest Corelogic figures show Melbourne home prices climbed 13.1 per cent in the year to February, while Sydney prices rose 18.4 per cent.
ASIC recently launched Federal Court proceedings against Westpac over allegations it did not properly assess the ability of borrowers to meet their home loan repayments.
The initial proceedings are set to be heard today.
Mr Medcraft said the rapid rise of digitalised financial services meant regulators would need to continually improve their skills and surveillance technology to stay ahead of potential fraudsters.
Advances in technology meant consumers had greater access to tailored financial services products, including so-called “robo-advice”.
But consumers’ willingness to embrace new products left personal information open to potential misuse.
After handing ASIC a $121.3 million funding injection in last year’s Federal Budget – partially restoring previous cuts – Treasurer Scott Morrison said the watchdog would be challenged to improve its company surveillance measures.
Earlier this month it revealed that three companies listed on the Australian share market at which it had raised concerns over the carrying value of some assets, had subsequently issued heavy writedowns.
Mr Medcraft said ASIC has been trialling software allowing it to scour the internet for potentially misleading marketing claims in accounting and self-managed superannuation funds.
Australian Prudential Regulation Authority chairman Wayne Byres said there was little to prevent US technology giants Apple and Google from launching financial services products to compete against the big four banks.
AUSTRALIAN Prudential Regulation Authority chairman Wayne Byres says he believes there’s a readymade Australian market for the likes of Apple and Google should the US tech giants expand into the financial services industry.
“Financial services ultimately is an industry that’s built on trust and if you think about the next generation that’s coming through, certainly when I think about my kids, the brands they trust – Apple, Google – it’s the technology brands,” he said.
“They wouldn’t have a clue about the four major banks we have here ... (and) as far as my kids are concerned, they have accounts with Apple so we’re not actually that far away.”
A KPMG report released last week suggested 84 per cent of millennials would consider banking with a tech giant if they offered a better product or deal than a traditional bank, and Mr Byres said there was little to prevent more competition.
Apple already offers Apple Pay which lets iPhone users use their device like a contactless credit or debit card in more than a dozen countries, including through ANZ, Macquarie, MyState and others in Australia.
There could be scope for it to issue credit cards, mortgages and small business lending should it so choose.
Mr Byers told the Australian Securities and Investments Commission’s annual forum in Sydney: “You can do anything in this country without an APRA licence except for one thing and that’s take a deposit.”
ASIC chairman Greg Medcraft said he expects Apple, Google or Amazon to target areas they see as under-served, as Chinese retail giant Alibaba has done with small business lending.
“What puts the fear into the heart of banks is the prospect of Amazon in particular. I think they’re coming,” Mr Medcraft said.