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Property loans and capital
Sydney, 5 November, 2009: In response to a newspaper story1 yesterday, the Australian Bankers’ Association (ABA) said that property investors should not expect any changes to bank property lending as a result of the Australian Prudential Regulation Authority’s (APRA) recently announced common definition of Income Producing Real Estate (IPRE).
While property lending is strictly a commercial matter for individual banks, the article suggested that banks may now be able to materially reduce capital held against these loans. This, in turn, creates an expectation that banks will then be in a position to expand issuance of these sorts of loans or charge lower premiums.
This expectation is incorrect.
It is true that APRA has finalised additional criteria for what constitutes a specialised property loan, but this does not imply any significant easing in capital requirements. Indeed, in some instances, these criteria may lead to higher capital requirements.
An ABA working group was formed some time ago to make a recommendation to APRA on a consistent definition of IPRE. We are pleased that final criteria are now published on APRA’s website.
For further information:
Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
[1] Australian Financial Review 4/11/09 “APRA eases property loan load” by Tony Boyd, page 55 |
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