Confidential report reveals APRA banking crisis, a serious property crash could send Australia into recession
"In a steady economic scenario over the next three years, the delinquency rate is predicted to reach 7.5 per cent.”
ABC News 7.30 has been told that APRA's then-chairman, John Laker, told staff that the report could not be published because it would panic investors and could undermine the banks. Last year, in a footnote to a speech, (current) APRA chairman Wayne Byres revealed that Australia's big four banks and Macquarie did not have enough capital set aside against mortgages to cover loan losses in the event of a severe house price crash.
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Date: April 6, 2016 at 10:56 AM
Published by: ABC News
Reporter: Stephen Long
Video: Watch on YouTube - Watch on YouKu
Category: Australia Real Estate
That speech got veteran banking analyst Brian Johnson, of CSLA, concerned.
"As I read the speech that APRA made I'd have to say it was one of the most disturbing things that I have ever read," Mr Johnson told 7.30.
"What they said is that the standardised banks, which are basically the regional banks, just passed.
"They said that the advanced banks, which is basically the major banks, they said that they did not pass.
"I would say 'did not pass' means fail.
"I've been instructed by one of the banks that's not what it means but it sounds like that to me.
"If my child came home and said 'I did not pass', I would say 'you failed’."
Mr Byres admitted at a Senate Committee last year that a further erosion of bank lending standards in recent years had caught the regulator unawares.
"I think we were caught a bit by surprise at how much the competitive pressures in the industry — the competitive dynamic in the industry — had led people to do things that were really, in our view, lacking in common sense," he said.
"It did seem that competition was eroding standards."