Westpac’s Brian Hartzer says box ticking threatens lending to next Justin Hemmes or Carla Zampatti
Westpac CEO Brian Hartzer says back in the day, the bank backed Justin Hemmes based on judgment. But with the rise of box-ticking, he wonders if it would still have the option to do so.
NSW
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Red tape and regulation is the leading complaint among small businesses and is jeopardising entrepreneurship, a top banker has told parliament.
Another has revealed why rate reductions are not doing much to boost consumer spending — 93 per cent of its principal-and-interest home loan customers have not reduced their mortgage repayments in response to recent cuts.
Speaking at a House of Representatives economics committee on Friday, Westpac CEO Brian Hartzer said “the number one thing that we hear our small business customers talk about is the challenges of red tape and regulation at various levels that they face”.
In answer to questions from Sydney Liberal MP Jason Falinski, Mr Hartzer also said the rise and rise of box-ticking was inhibiting bankers’ ability to use judgment.
He said entrepreneurs Westpac supported in their early days, such as pub baron Justin Hemmes and fashion designer Carla Zampatti, might struggle to get a loan from the bank now.
“We were able to help those people at a point in time where they didn’t necessarily have the documentation to fit squarely within the box,” Mr Hartzer said.
“A banker was able to exercise judgment to support them.
“It’s clear that some of the (responsible lending) requirements are making it more challenging for bankers to feel confident exercising that judgment.”
Commonwealth Bank of Australia disclosed that only 69,000 out of one million principal and interest mortgage customers requested repayment reductions after the June and July rate cuts.
Recent research by the Reserve Bank of Australia research shows the average home loan borrower is 2½ years ahead of required mortgage repayments — twice as far in front as was the case when the RBA cash rate began its run of falls in late 2011.
The committee was however told the recent tax cut had to open wallets and purses.
CBA CEO Matt Comyn said its analysis found a 28 per cent increase after the cut began to take effect in July.
Labor MP Andrew Leigh questioned Westpac about existing bank customers being charged higher interest rates than new customers — the so-called “loyalty tax”.
“I don’t accept that characterisation,” Mr Hartzer said, before conceding that the bank’s pricing on mortgage products had been less than transparent.
“That is something we are trying to address,” he added, by phasing out “below the line” discounts that not all customers knew were available.
Treasurer Josh Frydenberg recently told the Australian Competition and Consumer Commission to investigate home-loan pricing, including the loyalty tax.
The RBA released new growth forecasts yesterday, slowing the rate of pick-up compared to its previous expectation. It is now anticipating the economy will expand by 2.5 per cent this financial year, down from 2.75 per cent.
NAB and ANZ are due to appear before the committee next week.