Australian regulators watching non-banks for financial stability risks: RBA

SYDNEY (Reuters) – Australian regulators are “monitoring” fast-growing non-bank lenders for possible financial stability risks, a senior central banker said on Monday.

Non-banks have expanded their market share in Australia recently particularly for interest-only loans, a product category considered high-risk by policymakers.

“The Reserve Bank’s liaison indicates that non-banks have been lending to some borrowers who may otherwise have obtained credit from banks in the absence of the regulatory measures,” said Christopher Kent, assistant governor of the Reserve Bank of Australia (RBA) said in a speech in Sydney.

Australia’s major banks have clawed back from the property market following a regulatory clampdown that forced them to slow lending to home investors.

“Consistent with this, the Securitisation Dataset shows that a rising share of non-bank lending has been to investors.”

The share of investor loans across all outstanding non-bank deals have increased by at least five percentage points over the past 2-1/2 years, Kent said.

This is in sharp contrast to the share of total bank loans to investors, which has been declining over that period.

Similarly, the share of non-bank loans that are on an interest-only basis has been stable over the past couple of years, whereas that of banks has declined significantly over the same period, Kent added.

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