SYDNEY, May 28 -- Australian Prudential Regulation Authority issued the following media release:
The Australian Prudential Regulation Authority (APRA) will keep its macroprudential policy settings steady following its latest review of domestic and international financial conditions and risks.
APRA's macroprudential policy tools are aimed at mitigating financial stability risks at a system-wide level to promote a safe and stable financial system that enables households and businesses to confidently borrow, save and invest for the future.
APRA has today confirmed that:
* the mortgage serviceability buffer will remain at 3 percentage points;* the countercyclical capital buffer will remain at 1 per cent of risk-weighted assets; and,* high debt-to-income (DTI) lending limits remain unchanged, allowing banks to lend up to 20 per cent of new owner-occupied and investment loans at DTI greater than or equal to six times.
In deciding to keep its settings steady, APRA considered the high degree of uncertainty in the operating environment and the impact that the shift in the economic outlook is having on risks to financial stability.
In particular, APRA noted:
* households remain highly indebted. Housing credit growth for the March quarter was strong for investors and around average for owner-occupiers. However, there are signs of moderation in housing price and credit growth. Business credit growth remains above its historical average;* pressure on household and business cashflows have increased due to higher inflation and interest rates but non-performing loans remain low. Strong buffers mean that most households and businesses are well placed to weather these pressures. The serviceability buffer helps ensure that recent new borrowers can continue to service their loans in the face of higher expenses and interest rates;* higher risk forms of mortgage lending are contained and lending standards are sound. Based on preliminary March quarter data, high DTI lending remains well below APRA's DTI limits and so the limits are not restricting overall bank lending. However, this type of riskier lending had been increasing over the past year and - given the uncertainty in the outlook - it is prudent for the limits to remain in place as guardrails for now; and* the banking system remains well-capitalised and resilient and is well-positioned to absorb shocks should economic conditions deteriorate significantly.
APRA Chair John Lonsdale said that while existing settings remain appropriate for now, the risk landscape is volatile and could evolve rapidly.
"Since APRA's last update, there has been a shift in the macroeconomic outlook. Interest rates have increased over recent months amid elevated inflation. The conflict in the Middle East is impacting economic and financial conditions in Australia, as higher oil prices add to cost pressures for households and businesses.
"Consumer sentiment and business confidence have weakened and downside risks to economic growth are heightened. Depending on global developments, these impacts could either ease or become more severe in the period ahead.
"At this stage, arrears and non-performing loans remain low and there is no evidence that the banking system is restricting credit supply to preserve capital positions in response to greater anticipated credit losses.
"APRA's System Risk Outlook, released last week, highlighted that Australia's financial system is resilient and well-positioned to support our economy in a potential downturn. APRA will remain alert for any early signs of risks materialising that could negatively impact financial stability and will adjust macroprudential settings if needed," Mr Lonsdale said.
Disclaimer: Curated by HT Syndication.
