Big banks will report significantly more data to the Australian Prudential Regulation Authority after problems with their classification of owner-occupier and investor mortgages hindered regulators' ability to respond to an over-heating housing market.
A heightened reporting burden on the large banks – which will include them providing new data on aggregate interest rates, credit applications and finance commitments – will be offset by lower reporting requirements for smaller institutions, APRA said on Monday, in an Economic and Financial Statistics discussion paper produced with the Australian Bureau of Statistics and Reserve Bank of Australia.
Governor of the RBA Philip Lowe criticised banks in late 2015 after some made large upward revisions to the value of investor loans outstanding and reclassified some investor loans as loans to owner-occupiers.
"These data problems have emerged as lenders have taken a closer look at their housing loans following increased supervisory scrutiny," Mr Lowe said in November 2015. "As lenders have looked more closely, what they have found has surprised and, to some extent, concerned us ... it is disappointing that some lenders' internal systems have not been up to the task of reporting accurate data on the split between investor and owner-occupied housing loans."
The review of data collection by APRA, the ABS and RBA followed a referral from the Council of Financial Regulators in the wake of the banks' revisions but the reforms are broader than housing loan classification.
APRA said the new collection "will contribute to a better informed, and therefore more sound, policy environment for industry to operate in" because "the availability of high quality, relevant data allows for a clear presentation of facts and contributes to informed public debate".
"It is anticipated that the improved forms, instructions, additional data quality standard and reporting guidance will increase reporting institutions' certainty about the expectations of the agencies and assist reporting institutions submit data that are fit for purpose," the paper said. APRA has asked for submissions by April 18 and said it welcomed information on the financial impact of the proposed changes.
Data reported to APRA by the banks is used by the RBA to compile key macroeconomic indicators and for analysis and policy. The ABS uses it to compile the national accounts. APRA uses it for prudential supervision and when publishing its monthly banking statistics, which now might be expanded, APRA said. Some of the numbers are also reported to international regulators and agencies.
Changes to reporting of balance sheet items, repurchase agreements and securities lending is proposed to take effect on July 1, 2018, while reforms to data on interest rates, finance commitments and profits is proposed to take effect on January 1, 2019.
The cumulative effect of the banks' upward revisions to outstanding investor loans increased the stock of investor credit outstanding by about $50 billion, or 10 per cent, while the increase in owner-occupier loans came after banks began raising interest rates on investors. This led some borrowers to indicate they were actually an owner-occupier rather than an investor to avoid paying the higher rate, Mr Lowe observed.
