From the AFR comes heavy-duty confirmation that all is not as it should be in Australian bank arrears:
The banking regulator has warned lenders they are not doing enough to accurately report overdue loans in relation to home borrowers who are granted hardship concessions.
…Hardship concessions granted by banks when someone is ill or unable to work due to serious injury, typically allow for a reduction in the interest rate, lengthening of loan maturity, or full or partial deferral of interest for a temporary period.
…“APRA has seen some instances of ADIs [authorised deposit taking institutions] re-ageing arrears on loans granted such concessions in order to prevent the triggering of collections processes,” APRA executives Keith Chapman and Brandon Khoo said in a letter sent to banks and dated August 8.
“While this practice may be reasonable from an operational perspective, it can obscure prudent internal and regulatory reporting of past-due and impaired loans.”
The AFR puts this down to risk reporting clashing with “consumer laws designed to help people who fall on hard times” Deep T. has suggested repeatedly that the reason Australian bank arrears remain low despite obvious housing market stress is that the banks can hide bad loans in purgatory buckets for a considerable period. A less generous interpretation, certainly, but one that fits nicely with the need for the regulator to write a letter…
