AMP’s Murray warns banks stifled by ‘black-letter law’


A long-standing critic of attempts to regulate culture, Mr Murray reiterated his view that banking regulators’ focus on culture was “going over the top”.

“We’re starting to lose sight of what culture is about, and we can’t solve problems starting with culture, we solve problems starting with systems,” he said.

The former chief executive of the Commonwealth Bank and Future Fund chair also said the superannuation system lacked transparency.

The AMP chairman has previously said that improving banks’ culuture will not be achieved by regulation alone.

The royal commission has exposed wide-ranging misconduct within the industry, including customer rip-offs and the provision of dodgy financial advice, which has led to expectations the sector will inevitably face further regulation.

The impact of the commission and increased regulation dominated much of the discussion at the conference, as banks face a crunch on profits from slower loan growth and higher costs from regulation.

Mr Murray also took aim at responsible lending laws, an area where the royal commission scrutinised banks fiercely, but did not ultimately recommend any change.

Mr Murray said he understood that commissioner Kenneth Hayne believed there should be “reasonable inquiry” into borrowers, but added “that does not need 50 pages of black-letter law that if disobeyed can result in serious consequences for loans officers in banks and other institutions”.

“There is no way that a responsible lending law supervised by a conduct regulator will result in a healthy credit formation system,” he said.

Later, Westpac senior executive David Lindberg who warned that small business customers’ access to credit was being restrained by an array of regulations targeted at the housing market, and bankers’ fears of making mistakes.

Mr Lindberg, who runs Westpac’s business bank and will soon lead its consumer arm, on Tuesday said small business customers were being caught up in the new interpretation of responsible lending rules, which are designed to protect consumers. The  result was a “textbook case of unintended consequences,” he said.

Westpac’s David Lindberg said business customers were being caught up in responsible lending laws.Credit:Peter Braig

Speaking at the  summit, Mr Lindberg said regulators’ attempt to take the heat out of the housing market were flowing through to business customers, and this was damaging their willingness to invest.

As well as the “macroprudential” caps on credit growth, regulators had also forced banks to follow “microprudential” rules, he said, including detailed requirements on how they assessed customers for loans, and an “incredibly high” administrative burden. Some customers had seen their borrowing capacity slashed by 30 per cent as a result of the changes, Mr Lindberg said.

Falling house prices were also having an impact because many business owners put their homes up as security. Bankers were also more fearful of making mistakes in the current environment, he said.

“Businesses have stopped investing in themselves. This is a problem. Demand for credit has slowed and business credit growth has sunk lower than we have seen in recent memory,” Mr Lindberg said.

“There is a power structure in Australia that businesses must rely on. It includes government, it includes regulators, and it includes banks. Today, that power structure is letting businesses down.”

CLSA banking analyst Brian Johnson said there had been very little business credit growth since the global financial crisis, and banks had been following the rules on mortgage lending “quite poorly,” which caused regulators to crack down on the mortgage market. Even so, he said predictions of house prices falling another 35 per cent were “nonsense.”

“Credit growth fades, but I’m certainly not in the camp that says it plunges to zero,” Mr Johnson said.

A portfolio manager at Fidelity International, Kate Howitt, said the banks’ mortgage books would be a lot “cleaner” as a result of the tighter regulation of home lending in recent years, and this was healthy for the Australian economy.

Clancy Yeates is a business reporter.

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