ANZ Confirms UDC sale to HNA is not proceeding

ANZ today announced the agreement to sell UDC Finance to HNA Group will not proceed as the agreement with HNA has now been terminated in accordance with the contracted timeframe.

This follows the 21 December 2017 announcement that New Zealand’s Overseas Investment Office had declined HNA Group’s application to acquire UDC Finance.

ANZ Group Executive and New Zealand CEO David Hisco said: “Following the termination of the agreement with HNA, we’ll continue to assess our strategic options regarding the future of UDC, although there is no immediate requirement to do anything.

“It will be business as usual for staff and customers. UDC continues to be a very profitable business with a strong capital position and a growing loan portfolio across a range of industries.

“Its focus remains on its core business of financing vehicles and equipment for people and companies across New Zealand,” Mr Hisco said.

Global lender selects Aussie fintech, Trade Ledger, as worldwide technology partner

Zürich-based lender, TradePlus24, has selected Australian deep tech startup, Trade Ledger, as its global technology partner to roll out its new trade insurance wrapped lending product across their European lending network, and enter the Australian market.

TradePlus24, backed by Credit-Suisse, chose Trade Ledger because its platform not only automates the entire credit assessment process, allowing for rapid scale, but because it can also assess SME supply chain data in real-time while calculating risk down to the individual invoice in real-time – two things no other lending tech can currently do.

“A major problem for banks and other lenders across the globe is the cost, effort, and perceived higher risk of loan origination in the SME sector in particular,” said Martin McCann, CEO and Co-Founder of Trade Ledger.

“This sector has long been plagued by outdated credit assessment technologies that prevent lenders from easily or cost-effectively acquiring real-time information about persistent risk, individual transactions, or trade document updates.

“The result is enormous uncertainty, leading lenders to either applying a premium, or avoiding lending to individual SMEs altogether. According to PWC’s recently released report, the Australian SME working capital gap is more than $90 billion as a result – though this is on the low side of our estimates.

“By removing these technical limitations around documentary trade processes, and completely automating the credit process, lenders can significantly reduce the cost of loan origination, completely eliminate certain types of risk and fraud, and rapidly increase the volume of their loan book – all without adding extra staff,” continued Martin McCann.

“We are extremely excited to partner with TradePlus24 because we feel their secured global receivables financing solution is unmatched in the Australian market, and allows SMEs and mid-market companies to leverage their domestic and export accounts receivables in a completely new and unique way.

“We believe this makes them one of the most advanced SME lending products in the world, so we’re extremely proud to assist in bringing such a quality product to the local market,” concluded Martin McCann.

The Trade Ledger platform will facilitate TradePlus24’s entrance into Australia, which is a market deemed highly attractive because of its historically high margins and minimal competition from global players.

TradePlus24 expects to select a local Australian banking partner, but wanted a “born global” solution for its technology needs, to automate and manage its entire global operation spanning Europe, Asia, and Australasia, all on one advanced platform.

“To realise our growth ambitions, it was imperative to find a comprehensive technology solution that could be seamlessly applied across our entire global value chain,” said Ben James, CEO of TradePlus24.

“We believe the future of lending is not with slow-moving lenders employing legacy technologies, rather with strategic technology partnerships that give lenders a competitive edge by cracking the SME working capital market.

“It’s our opinion that the Trade Ledger platform is the key to cracking this market for us,” concluded Ben James.

For more information on Trade Ledger: and

The Shifting Sands of the Mortgage Industry

The latest AFG Mortgage Index just released, to December 2017,  really highlights some of the transitions underway in the industry. While the view is myopic ( as its only their data) it is useful.

First, there has been an astonishing drop in the number of interest only loans being written, from 60% of volume in 2015, to 20% now – WOW! We also see a small rise in first time buyer volumes, as expected. So the regulatory intervention is having some impact.

But, the second chart shows the volume of lodgements rising but the average loans size rising (faster than income and inflation). Victoria stands out as the state to watch with an increase in average loan size over the past 12 months nearly double the size of the increase in New South Wales. So more still needs to be done on the regulatory front.

The share of the majors banks is falling, as we have seen from other data, as smaller players and non-banks pick up the slack.

Here is their commentary:

As the year drew to a close, Victoria stands out as the state to watch with an increase in average loan size over the past 12 months nearly double the size of the increase in New South Wales.

“There has been a lot of focus on Sydney house prices, and therefore mortgage sizes, but homebuyers in Victoria are seeing the biggest increases,” explained AFG CEO David Bailey. “In Victoria, the average mortgage size has jumped 3.2% in the final quarter of 2017 to now be sitting at $496,815.”

The increase in the last 12 months for Victoria was $20,385 compared to $10,662 for NSW. With the average NSW mortgage already substantially higher than in Victoria, the increase over the last 12 months was 4.3% for Victorians compared to 1.8% for those buyers in NSW.

“The average loan size in New South Wales is now $613,084. Queensland has increased by 3.4% to now be sitting at $416,921. South Australia is up 3.4% to $390,706. The Northern Territory is up 22% to $469,502, albeit from a low volume. Reflecting the challenges being encountered by the WA economy, the state’s average loan size is down 1.1% to $439,944.

Overall, the national average loan size is up 2.8% over the past 12 months.

“Fixed rate products have dropped back to 21.9% of the market after a high of 26.5% last quarter and First Home Buyers are sitting steady at 13% for the second consecutive quarter.

“What is noticeable is that the majors are continuing to lose ground to the non-majors, as borrowers increasingly look at alternatives to the major bank owned brands. The majors have 64.2% of the market compared to the non-majors sitting at 35.8%,” said Mr Bailey.

“Whilst tightened lending criteria continues to impact the market, particularly with respect to refinancers, our overall volumes compared to prior year remain strong. Refinancers now represent just 22% of the market. Investors have also been caught in the cross-hairs and have dropped to 28%.”

As they turn away from Investors, the majors are proving competitive for First Home Buyers (69.6%). Overall, Upgraders are proving attractive to lenders and now represent 44% of the market.

“Interest rate and lending policy changes have meant many clients are turning to their mortgage broker for help to understand what the changes may mean for them,” said Mr Bailey.

“Individual circumstances are assessed differently by lenders, so having the insight into which lender may be the right fit for your needs is vital to a consumer looking for finance. A mortgage broker is uniquely placed to have that information.

ASIC Licenses First Crowd-sourced Funding Intermediaries

The Australian Securities and Investments Commission (ASIC) has licensed the first crowd-sourced funding (CSF) intermediaries under the new CSF regime.

Seven companies have been issued with Australian Financial Services (AFS) licence authorisations to act as intermediaries able to provide a crowd-sourced funding service. With the grant of these new authorisations eligible public companies will now be able to use the CSF regime to raise capital by making offers of ordinary shares to investors via the on-line platform of one of these intermediaries.

ASIC Commissioner John Price said that this marked a significant milestone for crowd-sourced funding in Australia.

‘ASIC has been assessing applications as a matter of priority, as suitable intermediaries needed to be licensed before fundraising under the new regime could commence. Intermediaries have an important gatekeeper role which will be key to building and maintaining investor trust in crowd-sourced fundraising, so we are pleased to have now issued the first tranche of authorisations,’ he said.

The CSF regime is designed to provide start-ups and small to medium sized companies with a new means to access capital to develop and grow. CSF offers are subject to fewer regulatory requirements than other forms of public fundraising.

The newly licensed intermediaries have now been added to ASIC’s register of AFS licensees. ASIC’s free online search can be used by investors, potential crowd-sourced funders and others to confirm the authorisations held by individual licensees. ASIC encourages both CSF investors and companies to check whether their intermediary holds an AFS licence with appropriate authorisation to provide CSF services.

ASIC has previously highlighted the importance of investors understanding both the benefits and risks of investing via crowd-sourced funding. Further information regarding crowd-funding can be found on ASIC’s MoneySmart website.


On 29 September 2017 the Corporations Amendment (Crowd-sourced Funding) Act 2017 and associated regulations came into effect – establishing a regulatory framework to facilitate crowd-sourced equity funding in Australia.

One of the key objectives of the regime is to reduce the regulatory burden on smaller companies associated with raising funds from the public via the issue of ordinary shares.

November Retail Trends Underscores Weak Growth

Australian retail turnover rose 1.2 per cent in November 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.  Black Friday and iPhone X sales drove the outcome says the ABS. This follows a 0.5 per cent rise in October 2017. Some will spruke this as a positive sign.

However the more reliable trends are less positive, with the trend estimate for Australian retail turnover up 0.1 per cent in November 2017 following a rise (0.1 per cent) in October 2017. Compared to November 2016 the trend estimate rose 1.7 per cent. This is still weak, reflecting stagnant wage growth, rising costs and high levels of debt.

The state trend data showed NSW, ACT and QLD  had no change, NT fell 0.2% along with WA, while VIC rose 0.3% and SA 0.4%, and TAS rose 0.2%.

“In seasonally adjusted terms, rises were led by the household goods (4.5 per cent) and other retailing (2.2 per cent) industries,” the Director of the Quarterly Economy Wide Surveys, Ben James, said. “Seasonally adjusted sales in both these industries are influenced by the release of the iPhone X and the increasing popularity of promotions in November, including Black Friday sales.”

There were also rises for clothing, footwear and personal accessory retailing (1.6 per cent) and cafes, restaurants and takeaways (0.4 per cent). Department stores fell (-1.1 per cent) whilst food was unchanged in November 2017.

In seasonally adjusted terms, all states rose. There were rises in Victoria (1.8 per cent), New South Wales (1.0 per cent), Western Australia (1.4 per cent), Queensland (0.7 per cent), South Australia (1.5 per cent), Tasmania (1.8 per cent), the Australian Capital Territory (1.2 per cent) and the Northern Territory (0.2 per cent).

Online retail turnover contributed 5.5 per cent to total retail turnover in original terms. This is the largest contribution to total retail turnover from online sales in the history of the online series.

Visa and Dynamics Unveil the World’s First Wallet Card

Will the future of digital money be cardless, as mobile devices pick up the slack? Well, perhaps not as Visa demonstrates a new Internet of Things (IoT) device which holds multiple payment cards and includes a digital display allowing for greater security, instant issuance and on-card alerts or coupons. Innovation, or the last gasp from “old” technology?

LAS VEGAS–(BUSINESS WIRE)–Jan. 8, 2018– Visa and Dynamics today unveiled the Dynamics Wallet Card™, a connected payment card, at the 2018 Consumer Electronics Show (CES). The Visa-branded version of the Wallet Card is the same size and shape as a normal Visa credit or debit card, yet it incorporates multiple features and technologies not previously found in a single payment card. Features of the Wallet Card range from the capacity to access multiple cards – whether EMV-, contactless- or magnetic stripe-based – to a programmable on-card display that enables account information, such as alerts or coupons, to be sent to the cardholder via an embedded antenna.

“Innovation in the payments category is not limited to wearables, cars, security or mobile technology – there is still much that can be done to update the card-based experience, which continues to be the primary form factor used globally to complete digital payments transactions,” said Mark Nelsen, senior vice president of risk and authentication products, Visa. “Having collaborated with Dynamics since they launched their first product several years ago, we’re excited about the many unique benefits that the Visa Wallet Card can offer to both financial institutions and cardholders, alike.”

Wallet Card includes a cell phone chip and cell phone antenna so data can be transferred between Wallet Card and a consumer’s bank anywhere in the world and at any time of the day.

The device offers a number of cardholder benefits and cutting-edge technologies, including:

  • Multiple Cards in One: Cardholders can access their debit, credit, pre-paid, multicurrency, one-time use, or loyalty cards on a single card with the tap of a button. Account information is shown on the on-card display with the ability to toggle between cards or accounts.
  • Instant Issuance: As the first instant, digital card platform, financial institutions can distribute Visa Wallet Card anywhere and at any time – such as in their retail branches or at events, and consumers can activate it right away.
  • Greater Security: A bank can quickly delete a compromised card account number and replace it with a new account number, providing convenience and peace of mind for the cardholder.
  • Alerts and Messages: An on-card, 65,000-pixel display shows both account information and allows messages to be sent to the Visa Wallet Card at any time. For example, after every purchase, a message may be sent to notify the consumer of the purchase and their remaining balance if they used a pre-paid or debit card. Cardholders can also receive coupons directly on the display or be notified of a suspicious purchase and click on “Not Me” to report suspected fraud and request a new card number.
  • Self-Charging Battery: An organic chip ensures the payment card charges itself through normal operation and doesn’t require any work for the cardholder.

“Visa supported the initial launches of Dynamics first- and second-generation powered cards which brought new functionality to payment cards,” said Jeffrey Mullen, CEO of Dynamics Inc. “Today, we are pleased to again have Visa by our side as an integral partner and thought leader as we launch Wallet Card, our most innovative payment card to-date.”

China implements Basel Committee framework for controlling large exposures, curtailing bank risk

From Moody’s.

Last Friday, the China Banking Regulatory Commission published for public comment a draft regulation of commercial banks’ large exposure management in accordance with the Basel Committee on Banking Supervision’s framework. The draft regulation is credit positive for banks because it will quantifiably curtail the shadow-banking practice of investing in structured products without risk-managing the underlying exposures and will limit the concentration risk in traditional non-structured loan portfolios.

For the first time, regulators are introducing binding and quantifiable metrics to implement the look-through approach when measuring credit exposures of investments in structured products, as emphasized in a series of recent steps to tighten shadow banking activities.  A bank must aggregate unidentified counterparty risk in a structured investment’s underlying assets as if the credit exposures relate to a single counterparty (i.e., the unknown client) and reduce that aggregate exposure to below 15% of the bank’s Tier 1 capital by the end of 2018. Any investment in structured products above the capped amount must identify counterparty risks associated with underlying assets so that investing banks can manage the risks accordingly.

The draft regulation’s measure of the unknown client limit will discipline banks’ implementation of the look-through approach to their investment portfolio to address opaque bank investment categories such as “investment in loans and receivables” that have been originated by other financial institutions. For the 16 listed banks that we rate, which account for more than 70% of the country’s commercial banking-sector assets, total investment in loans and receivables was slightly more than 100% of Tier 1 capital as of 30 June 2017. This implies a forced look-through approach will be applied to more than 85% of this segment of banks’ investment portfolios (see exhibit).

For the concentration risk in traditional non-structured loan portfolios, the draft regulation reiterates the current rule limiting a bank’s loans to a single customer to 10% of the bank’s Tier 1 capital, and extends the limit to include non-loan credit exposure to a single customer at 15% of Tier 1 capital. For a group of connected customers, either through corporate governance or through economic dependence, the draft regulation caps a bank’s total credit exposure at 20% of Tier 1 capital.

For a group of connected financial-institution counterparties, the draft regulation caps a bank’s total credit exposure at 100% of Tier 1 capital by 30 June 2019 and steadily lowers the cap to 25% by the end of 2021. In the case of credit exposures between global systemically important banks (G-SIBs), the cap is 15% of Tier 1 capital within a year of the bank’s designation as a G-SIB.

Treasury memo misses the real impact of Labor’s negative gearing policy

From The Conversation.

Labor MPs might be rubbing their hands together with glee at a Treasury memo that shows the federal opposition’s negative gearing policy will have a “small” impact on the property market. But insights from behavioural public policy, as highlighted by the 2017 Economics Nobel laureate – Richard Thaler and his colleague Cass Sunstein, tell us that how people respond to this policy will be more about how the government frames it.

The Treasury memo showed the Labor policy of limiting negative gearing to existing homeowners will have a limited impact as the changes are unlikely to encourage investors to sell quickly. Also, owner-occupiers dominate the housing market and the costs of selling are high.

However, this assumes that people are forward-looking, well-informed, good with numbers and perfectly responsive to new information. Behavioural economics shows us that people do not always think so deeply and logically about their choices.

How any changes to negative gearing are sold to us – as a loss or gain, as a one-off or ongoing, in terms of short versus long term costs and benefits – will impact how Australians react.

Most of us aren’t whizzes with mathematics. As Nobel prize winner Herbert Simon has shown, in place of complex mathematical algorithms we use heuristics. These are simple rules of thumb that draw on our intuitions, experience and gut feel.

Heuristics and biases

One common example of a heuristic is the availability heuristic. This is when we make decisions based on easily available information such as recent events and highly emotive experiences. Our brains work better with narratives and stories than with facts and figures.

Nobel economics laureates George Akerlof and Robert Shiller have applied a similar insight to analyse people’s perceptions of housing market fluctuations. They noted that we hear lots of stories about how house prices are on an upward trend. Via the availability heuristic, we easily remember these emotionally engaging stories, much better than we can remember the dry facts about the history of house price instability and housing market crashes.

This leads us to overestimate the chances of continuing house price rises, and to underestimate the chances of a fall, driving unsustainable house price increases – as witnessed, for example, in the American sub-prime property markets before the global financial crisis.

While heuristics can help us to decide quickly, they sometimes lead us into systematic mistakes – “behavioural biases”. This does not mean that we’re all hopelessly irrational. But for negative gearing it matters how a potential change is framed, and how that fits into our heuristics and biases.

Most economists (including those at Treasury) assume that one dollar is a perfect substitute for any other dollar. Whether we save A$100 via a tax break, win A$100 from a scratch card or earn A$100 from working overtime, it makes no difference.

Contrary to this view, behavioural economics has shown that the way we treat money is different depending on the contexts in which we earn and spend it. We have different “mental accounts” for consumption, wealth, regular income and windfalls. We are more likely to splurge money we’ve won from a scratch card than money we’ve earnt doing overtime.

This is another reason why framing is important. How the government frames a negative gearing change will determine the mental account to which we assign it, and therefore how we respond.

If negative gearing changes are considered a one-off hit – the opposite of a scratch card windfall – then property owners won’t worry so much. On the other hand, if the change to negative gearing is seen as an ongoing drain on our incomes, then they will worry a lot.

Another factor that will come into play is loss aversion – people are much more likely to worry about losses than gains. Evidence from behavioural experiments shows that home-owners over-estimate the value of their properties. This makes them reluctant to sell at reduced prices in a falling market.

It also means that Australians will resist negative gearing changes if these are framed as a loss, creating political pressures for a policy u-turn. It is difficult to predict how people might respond, but behavioural economics shows that any ructions might be avoided if the negative gearing change is framed as a gain.

For instance, Treasury predicts that the additional revenue raised from restricting negative gearing could be up to A$3.9 billion. Therefore, the negative gearing changes could cover more than 80% of federal government expenditure on veterans and their families.

In the long and short term

Treasury’s modelling notes there might be downward pressure on house prices in the short term from changing negative gearing, but that this will be small overall.

But a range of models and experiments have shown that people are disproportionately focused on tangible, short-term outcomes. For example, most of us find it hard to persuade ourselves to go the gym: the short-term costs are inconvenience and discomfort and the benefits seem intangible and distant. This is called “present bias”.

Recent work in behavioural economics confirms that framing (alongside a range of other socio-psychological influences) has a strong impact on our choices. Framing will determine how we perceive the policy, which mental account we will use to process it and how the various heuristics and biases identified by economics and psychologists will play out.

In the debates around negative gearing policy changes, these behavioural insights have not been highlighted. So perhaps Treasury could have added some psychology, alongside the economics, in arguing that house price falls are likely to be limited.

Author: Research Professor at the Institute for Choice, University of South Australia

Macroeconomic Blindspot and Zombie Firms

Interesting Panel remarks by Claudio Borio Head of the BIS Monetary and Economic Department, who argues that a core assumption implicit in policy setting is that macroeconomics can treat the economy as if it produced a single good through a single firm. The net effect of this assumption is to drag down interest rates and productivity.

The truth is much more complex, and within the economy there are “zombie firms”where resources are effectively misallocated, leading to reduced productivity and lower than expected economic outcomes, which will cast a long shadow through the economic cycle.

In my remarks today, I would like to suggest that the link between resource misallocations and macroeconomic outcomes may well be tighter than we think. Ignoring it points to a kind of blind spot in today’s macroeconomics.

It would thus be desirable to bridge the gap, investigate the nexus further and explore its policy implications. Today’s conference is a welcome sign that the intellectual mood may be changing.

As an illustration, I will address this question from one specific angle: the role of finance in macroeconomics. As we now know, the Great Financial Crisis (GFC) has put paid to the notion that finance is simply a veil of no consequence for the macroeconomy – another firmly and widely held notion that has proved inadequate. I will first suggest, based on some recent empirical work, that the resource misallocations induced by large financial expansions and contractions (financial cycles) can cause material and long-lasting damage to productivity growth. I will then raise questions about the possible link between interest rates, resource misallocations and  productivity. Here I will highlight the interaction between interest rates and the financial cycle and will also present some intriguing empirical regularities between the growing incidence of “zombie” firms in an economy and declining interest rates. I will finally draw some implications for further analysis and policy.

Their research shows first, credit booms tend to undermine productivity growth as they occur and second, the subsequent impact of the labour reallocations that occur during a financial boom is much larger if a banking crisis follows.

For a typical credit boom, a loss of just over a quarter of a percentage point per year is a kind of lower bound (Graph 1, lefthand column). The key mechanism is the credit boom’s impact on labour shifts towards lower productivity growth sectors, notably a temporarily bloated construction sector. That is, there is an economically and statistically significant relationship between credit expansion and the allocation component of productivity growth (compare the left-hand panel with the right-hand panel of Graph 2). This mechanism accounts for slightly less than two thirds of the overall impact on productivity growth (Graph 1, left-hand column, blue portion).

Second, the subsequent impact of the labour reallocations that occur during a financial boom is much larger if a banking crisis follows. The average loss per year in the five years after a crisis is more than twice that during the boom, around half a percentage point per year (Graph 1, right-hand column). Indeed, as shown in the simulation presented in Graph 3, the impact of productivity growth in that case is very long-lasting. The reallocations cast a long shadow.

Let me conclude by highlighting the key takeaways of my remarks for analytics and policy.

I believe we need to go beyond the stark distinction between resource allocation and aggregate macroeconomic outcomes often implicit in current analysis and debates – a kind of blind spot in today’s macroeconomics. There is a lot to be learned from studying their interaction as opposed to stressing their independence. I have illustrated this with a focus on the long-neglected link between finance and macroeconomic fluctuations. The financial cycle can cause first-order and long-lasting damage to productivity growth through its impact on resource misallocations. And we need to understand much better also the possible link between interest rates and such misallocations.

Policy, too, needs to be much better aware of these interactions. Some lessons are well understood, if not always put into practice. For instance, one such example is the need to tackle balance sheet repair head-on following a banking crisis so as to lay the basis for a strong and sustainable recovery. Such a strategy is also important to relieve pressure on monetary policy. Doing so, however, has proved quite difficult in some jurisdictions following the GFC . Other aspects need to be better incorporated into policy considerations. The impact of persistently low rates is one of them. How well all of this is done may well hold one of the keys to the resolution of the current policy challenges.

APRA Releases New Mortgage Lending Reporting Requirements

APRA has released the final version of the revised reporting requirements for residential mortgage lending. It comes into effect from March.

Gross income will need to be reported (excluding super contributions).  Reporting on self-managed superannuation funds (SMSFs) and non-residents should be included, as well as all family trusts holding residential mortgages. Reporting of refinanced loans should include date of refinance (not original funding date) and APRA says the original purpose of the loan is not relevant to reporting when refinanced.

On 24 October 2016, the Australian Prudential Regulation Authority (APRA) released proposed revisions to the residential mortgage lending reporting requirements for authorised deposit-taking institutions (ADIs), Reporting Standard ARS 223.0 Residential Mortgage Lending (ARS 223.0) and accompanying reporting guidance.

On 23 May 2017, APRA released a revised ARS 223.0, which responded to submissions received and proposed a small number of additional data items. APRA sought feedback on these additional data items.

APRA received six submissions from ADIs and industry associations in response to the May 2017 proposals. No submissions objected to the proposals, but changes and clarifications were suggested.

Today APRA released the final ARS 223.0. Reporting will commence:

  • for ADIs that currently report on Reporting Form ARF 320.8 Housing Loan Reconciliation (ARF 320.8), from the reporting period ending 31 March 2018; and
  • for ADIs that do not currently report on ARF 320.8, from the reporting period ending 30 September 2018.


Loan-to-income (LTI) and debt-to-income (DTI) ratios

APRA received feedback in two submissions that using gross income for LTI and DTI may not reflect ADIs’ risk management practices. However, ADIs that apply more conservative discounts or ‘haircuts’ to income will report higher LTI and DTI measures, limiting comparability. In APRA’s view, using gross income for reporting purposes is necessary to allow comparison between all ADIs, acknowledging that it does have limitations.

Two submissions asked for additional guidance on the definition of gross income. The definition of gross income for LTI and DTI reporting has been amended to exclude compulsory superannuation contributions. Further detail has been included in the reporting guidance.

Additional increases in lending

One submission sought clarity on whether loans to self-managed superannuation funds (SMSFs) and non-residents should be included in this item. The instructions have been updated to include such loans.
Two ADIs noted in submissions that they do not expect to report this item, as all increases in credit limits are already captured as new loans funded. APRA confirms that loans subject to a credit assessment should be reported as loans funded, and not as an additional increase.

Lending to private unincorporated businesses

APRA proposed that ADIs report two data items on loans to private unincorporated businesses that are secured by residential mortgages. The definition of private unincorporated businesses is consistent with the Economic and Financial Statistics (EFS) proposed by APRA, the Australian Bureau of Statistics and the Reserve Bank of Australia.

Three submissions stated that collecting information on ‘family trusts with a controlling interest in a business’ would be problematic. APRA has amended the definition to include all family trusts, not just family trusts with a controlling interest in business. The EFS definitions were also amended accordingly.

Two submissions suggested expanding the reporting to cover loans to all trading companies, to provide a more complete picture of ADIs’ lending activity. APRA does not propose to expand reporting beyond private unincorporated businesses. ARS 223.0 is intended to capture household (and similar) lending only. Commercial lending for property is captured on other reporting forms.

External refinancing

The current definition of external refinancing is limited to loans for substantially the same purpose as the loan they replace. One submission noted that it is not feasible for an ADI to know the predominant purpose of external loans. In line with EFS, the reference to the loan being for substantially the same purpose has been removed from the definition in ARS 223.0.

Loan vintage

Two submissions questioned if loan vintage should be measured from the date of a refinance or from the date of the original loan. As per the instructions, loan vintage is to be reported from when the loan is funded, meaning the date of a refinance should be used.