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Speaking to the House of Representatives for the review of Australia's four major banks, ANZ chief executive Shayne Elliott and chief risk officer Kevin Corbally have maintained that the Australian Prudential Regulation Authority's (APRA) 3 per cent buffer is still appropriate.
Mr Corbally stated that the major bank believes reducing serviceability buffers like the other major banks have done, would not have "materially helped" its customer base.
"Our position is that we believe the 3 per cent [buffer] that APRA has indicated to the banks is at an appropriate level.
"We may look to revisit that at a future stage, but that is our position at the moment," Mr Corbally said.
Mr Corbally further stated: "Obviously we've got an uncertain interest rate environment, our view is having a broad buffer is appropriate, not just from our perspective as a lender, but also from a customer viewpoint as well to provide them with some uncertainty around their ability to continue to service along bear in mind."
He explained that the buffer provides a contingency for increases in interest rates that could occur over the period of a loan.
"It also provides a buffer for any variation in income or expenses that the borrower might also have at the moment," Mr Corbally added.
Mr Elliott echoed this sentiment, stating the buffer is there to ensure customers can not only afford to pay the interest rates where they currently sit, but can also pay if rates climb higher.
"[It] makes perfect sense," Mr Elliott said.
"We can debate whether it's 3 per or 4 per cent, or 2 [per cent], but I think 3 per cent feels about right."
Mr Elliott added that there'll "always be exceptions" where a 3 per cent buffer should be lower or not applied, however, changing the buffer to around 1 per cent would not alter the amount of customers the bank would approve.
As it currently stands, ANZ is the only major bank to not adjust its serviceability buffers.
National Australia Bank (NAB) most recently announced that it would bring serviceability exceptions from 21 July to enable more borrowers to refinance.
Westpac's Streamlined Refinance policy has been available to refinancers from 22 May 2023, while the Commonwealth Bank of Australia's (CBA) 1 per cent serviceability buffer for select customers has been available since 23 June 2023.
APRA's warning to lenders
APRA's chair John Lonsdale wrote to banks to remind them of the regulator's expectations when it comes to managing exceptions to housing lending policy and to warn them that any banks reporting large volumes of policy exceptions will be subject to "heightened supervisory attention".
He added that while APRA’s prudential framework enables banks to use exceptions to policy to approve a loan that does not meet standard loan criteria (such as a reduced serviceability buffer or additional indicators of repayment capacity), these should be “managed prudently and limited”.
[RELATED: Only 1 remaining major to tweak buffers]
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