Australia’s ANZ, NAB blame tighter credit controls for slowdown in mortgage lending

SYDNEY, March 27 (Reuters) – Two of Australia’s largest banks on Wednesday said a crackdown on consumer credit checks was affecting their ability to take out new home loans even though approval rates were unchanged, a sign that the tightening of the regulatory environment weighs on the economy.

CEOs of No.3 lender Australia and New Zealand Banking Group Ltd and No.4 lender National Australia Bank Ltd gave a pessimistic assessment as they appeared in Parliament for the first time since an inquiry last year on the sector for overly aggressive loan sales.

The focus on checking the spending habits of potential borrowers slowed loan approvals and discouraged applications, NAB interim CEO Philip Chronican and CFO Gary Lennon said separately.

“Most borrowers who would previously have been eligible for a home loan continue to qualify for a home loan,” Chronican said at a hearing with the Parliament’s House of Representatives Economic Committee.

But potential borrowers had to verify up to 13 statements about their spending, and “as a result, we lend less on home loans than we could otherwise,” he added.

Lennon said that while the success rate for home loan applications has not changed from the previous year, the number of applications was down “potentially due to the difficulty in putting all the information together.”

Economists have also blamed the lack of consumer confidence over falling house prices and uncertainty about the impending federal election for a declining mortgage industry.

Australia’s economy slowed sharply in the December quarter and many economists expect the Reserve Bank of Australia to cut rates by August.

Although consumer credit checks became mandatory in Australia in 2012, a year-long public inquiry uncovered accusations of overly aggressive loan sales by the nation’s major banks, including the NAB.

This week, the NAB ended a program of paying members of the public bonuses for recommending mortgage sales. In parliament on Wednesday, Chronican said the bank made the decision after being embarrassed by critics of the program during the government-backed investigation.

ANZ CEO Shayne Elliott said stricter enforcement of lending standards meant some borrowers would have a harder time borrowing.

The CEOs of Australia’s “big four” banks are due to be the subject of regular hearings in parliament. Chronican became the interim CEO of the NAB after the former CEO and former chairman stepped down due to criticism contained in the investigation’s final report last month.

Chronican will become the bank’s chairman once the company hires a permanent CEO.

Reporting by Byron Kaye; Editing by Stephen Coates