The company regulator has hit again on the treasurer, Josh Frydenberg, over recommendations that accountable lending legal guidelines may make banks nervous to lend to small companies, describing the concept that the foundations crimped the circulate of credit score to the sector as a “fantasy”.
The Australian Securities and Investments Fee commissioner, Sean Worth, made the feedback in a speech on Thursday to a convention of credit score danger professionals on the Gold Coast.
A fortnight in the past Frydenberg informed the Australian Monetary Evaluation the federal government absolutely understood financial institution issues about “the necessity for readability in regards to the oblique utility of accountable lending legal guidelines to small enterprise when the household house is used as safety”.
“There’s an actual gray space as to what’s a small enterprise mortgage and a private mortgage,” he mentioned.
Worth didn’t identify Frydenberg immediately throughout his speech, however he mentioned there have been “a lot of myths and exaggerated claims in regards to the supposed results of the accountable lending legal guidelines” that had been “both not supported by the information or information or, if they’re actual, they’re the results of a basic misunderstanding and misapplication of the regulation”.
“The primary is the suggestion that small enterprise lending is negatively affected by the accountable lending obligations,” he mentioned.
“There was plenty of misinformation printed not too long ago within the media and within the present company reporting season in regards to the impact of the accountable lending necessities on small enterprise lending.”
He mentioned accountable lending legal guidelines didn’t apply to borrowings made predominantly for a enterprise objective, even when the mortgage was secured over the household house.
“So if somebody borrows $500,000 of which $300,000 is for use to determine a small enterprise, and the rest for making house enhancements, the mortgage isn’t topic to the accountable lending obligations,” he mentioned.
He additionally mentioned it was a fantasy that the accountable lending legal guidelines harm financial development.
“Certainly lending development experiences printed by the [Australian Banking Association] present that banks are nonetheless lending. Approval charges stay between 85% and 90% for house lending and 90% and 95% for enterprise lending,” he mentioned.
“As a substitute, the primary purpose for slower credit score development has been a decline within the demand for credit score.”
Worth additionally dismissed criticism for its enchantment in opposition to its lack of a lawsuit over accountable lending in opposition to Westpac – which had been accused of 250,000 circumstances of irresponsible lending – that has been dubbed the “wagyu and shiraz” case.
In September authorities backbenchers Jason Falinski and James Paterson criticised Asic officers over the choice in a torrid parliamentary committee listening to that adopted heavy lobbying of politicians by the banks.
Asic determined to enchantment the wagyu and shiraz resolution “to make clear the applying of the regulation”.
“And if the judgment is to be understood as standing for the proposition that a lender could do what it needs within the evaluation course of, as his honour discovered, then we take into account that to be inconsistent with the legislative intention of the accountable lending regime,” Worth mentioned.
“We shouldn’t be criticised for accessing the courts to resolve a dispute, as all regulators do every now and then.”