At last, Australia’s prudential regulator – APRA – has spoken, concerned by the budding apartment glut, which has left property developers exposed. From The AFR:
Banking regulators are concerned that commercial property loans are typically the first ones to go bad in a downturn, said the Australian Prudential Regulation Authority’s executive general manager of supervision and support, Charles Littrell.
“There is a lot of conventional work at our end focusing on sound lending – and in fact, we are now dialling up our systemic supervisory focus on commercial real estate,” Mr Littrell told a lunch time event in Sydney on Thursday…
The RBA’s head of financial stability Luci Ellis, agreed with APRA’s assessment that commercial lending is a concern:
“While it is true that we tend to see housing booms and booms in housing prices ahead of banking crises, it is usually not the mortgage book that is the issue that actually brings the banks down,” she told the same panel, at an event hosted by the Centre for International Finance and Regulation.
“The thing that has tended to be the casual agent in banking crises…[has been] the property developers [and] commercial real estate – these are the vectors of stress that actually cause a problem for the banking system historically.”
It’s all well and good to voice concern. But what are you both going to do about it? Instead of hiding behind a veil of secrecy, how about publicly announcing some measures aimed at mitigating these risks?
What actions (if any) that follow are important public policy judgments that should not be made in a vacuum, hidden from public view. In other words, please keep public participants in the loop.
