Qualitas’ Response to the New APRA Powers to Address Financial Stability Risks – Non-ADI Lender Rules

28 August 2017

On 17 July 2017, the Australian Government published the draft Treasury Laws Amendment (Non-ADI Lender Rules) Bill 2017 (the Draft Bill). The stated aim of the Bill is to “ensure that the Australian Prudential Regulation Authority (APRA) is able to respond flexibly to financial and housing market developments that pose a risk to financial stability, by providing APRA with new powers in respect of the provision of credit by entities that are not authorised deposit-taking institutions (non-ADI lenders), to complement APRA’s existing powers in respect of ADIs”.

In particular, The Treasury intends that the Draft Bill will:

1. “allow APRA to collect data from non-ADI lenders for the purposes of monitoring their activities and determining when to use its new powers”; and
2. “provide APRA with a power to make rules concerning the lending activities of non-ADI lenders for the purpose of addressing financial stability risks (non-ADI lender rules), provide

APRA with a new power to issue a direction to a non-ADI lender should the entity fail to comply with a non-ADI lender rule, and introduce penalties for non-ADI lenders that fail to comply with a direction by APRA”.

Qualitas has a number of key concerns in respect of the Draft Bill as follows:

• The role of non-ADI lenders in promoting competition and liquidity in the Australian property finance market, and thereby encouraging financial stability, is widely acknowledged and
should continue to be encouraged.
• Over-regulation, or untargeted and unfocussed regulation will have negative consequences for the property sector and the overall economy.
• Unnecessary additional compliance costs and administrative burden for non-ADI lenders will also have negative consequences for the property sector and the overall economy.
• It is important to distinguish between different types of lending activities and different segments of the lending and financial markets.
• It is also important to consider the source of funding for non-ADI lenders.
• The breadth of APRA’s rule making powers should be narrowed to reduce the potential for market and investor uncertainty in the non-ADI lending sector.
• There should be further, and ongoing, consultation with all relevant stakeholders.

Qualitas has made a public submission to The Treasury addressing these concerns.

Click here to read the detail of the submission.