Westpac chief executive Brian Hartzer says regulators’ post-royal commission focus on responsible lending has had unintended consequences on the economy, with banks itching to lend but finding it harder to do so.
Mr Hartzer on Tuesday said credit availability had been tightened by a “highly prescriptive” legal and regulatory approach, and that it needed to start flowing again if Australia’s economy was to reignite.
“The environment, and banks’ responses to today’s highly prescriptive rules creates a real issue for the future,” Mr Hartzer told the Trans-Tasman Business Circle in Sydney.
“Given the severe consequences of getting it wrong, it’s not surprising that bankers are building extra buffers into their policies and processes to make sure they stay well clear of the line.”
Mr Hartzer also said moves by the Reserve Bank of New Zealand to increase the amount of capital the country’s banks needed to hold had gone further than required.
“Ironically, by leaning so heavily on the banks it may actually lead to higher credit costs and a much larger and riskier unregulated lending sector, as the banks retreat,” Mr Hartzer said.