Australia rolling back banking regulations to spur economy
Published : Friday, 25 September, 2020 at 8:02 PM Count : 188
Australia plans to roll back “responsible lending” laws adopted in the wake of the financial crisis in an effort to spur an economic recovery from the coronavirus pandemic, officials said Friday.
The move sent banking stocks soaring, but drew sharp criticism from consumer groups and the opposition Labor Party.
Treasurer Josh Frydenberg said credit restrictions imposed on lenders in 2009 had stifled lending and was impeding efforts to recover from Australia’s first recession in nearly 30 years.
“As the nation strives to recover from Covid-19, the provision of and access to credit will be critical to rebuilding every sector of our economy, from hospitality to tourism, construction to retail,” he said in a statement.
The laws require lenders to take steps to determine if potential borrowers will be able to repay their loans in hopes of avoiding a repeat of the crisis sparked by the subprime mortgage meltdown in the US.
But Frydenberg said this “burden of regulation” had become an obstacle to economic growth.
“Across time, lenders have become increasingly risk averse and overly conservative. As a consequence, borrowers, irrespective of their financial circumstances, have faced an ever more intrusive, difficult and drawn-out approval process,” he said.
“What started a decade ago as a principles-based framework to regulate the provision of consumer credit has evolved into an overly prescriptive, complex, costly, one-size-fits-all regime known as responsible lending obligations,” he said.