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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Micro-regulation and fearful bankers are crimping credit

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Micro-regulation and fearful bankers are crimping credit

Australian Financial Review Mar 26, 2019 11.07am

James Frost

 

The availability of credit is being squeezed by the emergence of micro-regulation which is weighing on the size of loans small businesses can afford while making bankers fearful of making a mistake, Westpac’s business banking boss David Lindberg said.

Mr Lindberg – who was appointed to head up Westpac’s consumer banking division following an executive reshuffle last week – said responsible lending obligations and weaker house prices had contributed to a situation where business investment had “ground to a halt”.

Mr Lindberg said the combination of small business owners feeling the wealth effect and over-zealous bankers who were making borrowers go into excruciating details because "there are scared of making a mistake" was making matters worse.

Westpac's David Lindberg said a rise in 'bank fear' was exacerbating the credit squeeze. Peter Braig

“Australian businesses have stopped investing in themselves,” Mr Lindberg said. “Demand for credit has slowed and business credit growth has sunk lower than we have seen in recent memory.”

Despite data showing healthy credit growth, Mr Lindberg said core business growth was parlous with the official figures masked by funding for M&A and infrastructure investment.

Mr Lindberg highlighted the impact of the wealth affect which has traditionally been used to explain the reluctance of consumers to spend when house prices are falling.

Mr Lindberg said this was flowing through to small business explaining that a double digit fall in house prices was having considerable impact on how small business owners viewed a small business loan of $500,000.

“There are good businesses we can’t back and I’ve seen instances where borrowing capacity has reduced by 20-30 per cent.”

Mr Lindberg relayed the story where it took the bank 60 hours to approve a $900,000 mortgage for the owner of a business with a $20 million lending facility.

“This should have been one of the easiest loans to assess ... I’m sure you’d agree, this is simply not commercial, or sustainable.”

Mr Lindberg said the impact of the wealth affect on small business had been underestimated and the interplay between the reduced capacity of borrowers and strict applications of responsible lending obligations were beginning to bite.

“Micro-prudential regulation - originally designed to tamp down housing growth - is also reducing credit growth” Mr Lindberg said.

Over the last two years, banks have embarked on a marked shift in how they evaluate the expenses of loan customers following action from the regulator. Some banks have pivoted from using a benchmark to assess expenses to requiring granular data on expenses.

Mr Lindberg said the administrative burden on banks was incredibly high but accepted that in some instances the bankers were to blame.

“If a small business owner forgets to include their Foxtel bill or credit card for their daughter – the banker is scared of the consequences. Banks are using belts and suspenders to protect themselves. We have more manual checks, more onerous forms, and more reporting” he said.

“Banks are using belts and suspenders to protect themselves. We have more manual checks, more onerous forms, and more reporting.”

Mr Lindberg also said business more broadly was “drowning in regulation” and that the cumulative impact and the pace of change of regulation were affecting all businesses.

“Australia has over half a million pages of business regulation. If you could find it all in one place, which you can’t, it would take over six years to read,” he said.

Mr Lindberg noted there were currently 122 penalty rates for businesses to abide by and said Australia was falling behind globally and needed to address the issue before it gets worse.

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