By Paulina Duran
SYDNEY, July 30 (Reuters) - A push by Australian regulators to tighten lending rules risks slowing down Australia's sluggish economy even further, the chief executive of Westpac Banking Corp WBC.AX said on Tuesday.
Financial regulators are reviewing lending rules after an inquiry last year into financial sector misconduct that heard banks had underestimated borrowers' spending and in some cases approved loans to people that could not repay them. responses to today's highly prescriptive rules creates a real issue for the future," Westpac CEO Brian Hartzer said at a business lunch in Sydney.
A tighter regulatory approach would mean that Westpac, the country's second-largest bank, would turn down loan approvals for some wealthy and loyal customers who had received loans in the past, out of fear of breaking the rules, Hartzer said.
"That's not the bank we want to be for our customers. And that's not the banking system that Australia needs," he said.
In order to kick-start the economy, which is expanding at its slowest pace since the 2008 global financial crisis, lawmakers and banks needed to find a better balance between consumer protection and financial stability, he said.
Australia's Big Four lenders - Westpac, Commonwealth Bank CBA.AX , Australia and New Zealand Banking Group ANZ.AX and National Australia Bank NAB.AX - are under pressure from record-low home-loan growth and a new era of enhanced regulatory scrutiny following scathing revelations of misconduct at the Royal Commision inquiry.
Their earnings are also getting squeezed by the central bank's move to stimulate the economy with record-low policy rates. banks, economically it's incredibly challenging," Hartzer said. "That's why I think it's important for us to try to avoid going over a cliff and restore some confidence and get people investing again."
Hartzer also called on government to support credit demand by lowering property taxes, opening up new land, and building infrastructure around it to support it.