The Turnbull Government is taking action to further strengthen Australia’s financial resilience by extending our prudential regulator’s powers to non-bank lenders, as announced in the 2017 Budget.
The Turnbull Government is getting on with the job of implementing our Budget measures which will deliver a fairer and stronger financial system for Australians.
Since December 2014, the Australian Prudential Regulation Authority (APRA) has taken a series of steps to address emerging financial stability risks by tightening the lending practices of banks and other authorised deposit-taking institutions (ADIs), particularly in relation to residential home loans.
However, APRA does not have powers over the lending activities of non-bank lenders, even where they materially contribute to financial stability risks.
Today, the Turnbull Government is releasing draft legislation for public consultation that will provide APRA with these new powers.
- APRA will be able to issue rules relating to lending practices of non‑bank lenders, where it considers that they materially contribute to financial stability risks.
- These new rules will be backed by appropriate enforcement mechanisms. If a non-bank lender fails to comply with a rule, it will be directed by APRA to comply. If it fails to comply with an APRA direction, the non-bank lender will face appropriate penalties.
- The legislation also enhances APRA’s ability to collect data from non-bank lenders, so it can better tailor the use of these new powers.
These new powers will allow APRA to manage the financial stability risks posed by the activities of non‑bank lenders, complementing APRA’s current powers over ADIs
The Turnbull Government’s practice is to approach financial risks with a scalpel rather than a chainsaw – this measure provides APRA a new scalpel to deal with risks specific to non-bank lenders.
APRA will use its independent judgement to determine how and when to use this tool, in consultation with the Council of Financial Regulators.
The Turnbull Government is committed to ensuring that APRA is able to respond flexibly to financial and housing market developments that pose a risk to financial stability.
The exposure draft of this legislation and associated explanatory material is available on the Treasury website.
Submissions are due by Monday 14 August 2017 and can be sent to: lenderrules@treasury.gov.au. The Government encourages all interested parties to make a submission.