ASIC guidance may provide some respite on lending standards

The major banks have been tightening their income and expense verification processes over the last few years. Picture: AAP

If anything, ASIC’s updated guidance on responsible lending could lead to a slight relaxation in credit standards.

That’s because the major banks have been tightening their income and expense verification processes over the last few years.

They would have been foolish not to have done so, knowing that Ken Hayne’s royal commission juggernaut was bearing down on them.

ANZ Bank, of course, has openly admitted it got overzealous.

It paid the price by surrendering market share and has been desperately trying to claw it back ever since.

READ MORE: ASIC lending rules must fit criteria | ASIC to appeal responsible lending ruling

A similar process will occur with other lenders now that the regulatory guidance has been updated for the first time in five years.

It remains a work in progress, however, with the Full Federal Court to hear ASIC’s appeal next February in the celebrated “wagyu and shiraz” case involving alleged responsible lending breaches against Westpac.

The ramifications of that decision will be included in the updated guidance.

In a note on Wednesday, Macquarie analysts said some tightening in credit standards was expected in the non-bank sector as a result of ASIC’s revised requirements.

However, it was unlikely that the playing field would be sufficiently levelled for the majors to win back lost share.

An improved ability for customers to switch lenders would also maintain pressure on margins, and further narrow the pricing gap between the back book of loans and the front book.

According to Macquarie, the impact on credit availability will be insignificant and the big four’s market share will continue to erode, albeit at a diminishing rate.

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