UP FRONT • TMMONLINE.NZ/NEWS
Advisers inundated with bank policy changes Changes in bank procedures are coming through thick and fast as banks scramble to keep up with a flood of regulatory changes. Mortgage Lab founder and chief executive Rupert Gough says one bank alone made 37 policy changes in the past three months. Some of these stem from the Credit Contracts and Consumer Finance Act (CCCFA), which has been widely accused of smothering borrowers and brokers in red tape. But others come from new rules such as tighter restrictions on lowdeposit loans, imposed on banks by the Reserve Bank as an inflation-fighting tool. Gough noted that while one bank had altered 37 policies in the last quarter, others had made changes numbering in the low 30s. “Changes included splitting a few expense categories into many, and new rules for low-deposit lending.”
Gough found banks were varying quickly between red and green traffic lights for low-deposit loans; at present, most are sitting on a red light. But he was careful about allocating blame - insisting the flood of new rules was not the fault of the banks, who were simply responding to new laws and requirements from Government and regulators as best they can. The New Zealand Bankers Association (NZBA) attributes the rush of changes to the detailed nature of regulations stemming from the CCCFA law change. An NZBA statement noted the changes required banks to gather and verify a large amount of information about the loan applicant’s income, outgoings and expenses. “The list is long, and includes things like accommodation, insurance, school fees, child support, debt repayments, utilities, food, clothing and personal care, medical
and transport expenses, savings and investment contributions, entertainment, and tithing.” The NZBA said the complexity of the new system required banks to design and implement changes, and to train their staff to apply them properly, to ensure they are complying with the new rules. Some advisers have also complained about different systems from different banks: the multiple changes come in many forms depending on which bank they are dealing with. But the NZBA has ruled out a uniform approach for competition reasons. “Banks are very much in the business of lending. They are also responsible lenders and take requirements to comply with the law very seriously.”
Avanti maintains its credit rating Credit ratings agency S&P has retained its existing assessment of Avanti Finance as ‘stable’. Avanti is now the second biggest nonbank lender in the country, having risen tenfold in a decade to sit behind UDC Finance. The company has a BB/Stable rating, which was unlikely to change in the near term, the agency said. Avanti’s total assets were $1.62 billion according to a survey late last year, with S&P finding the company was in good shape. “Our ratings on Avanti reflect its very strong capitalisation and defendable niche position as a finance provider 06
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to those not actively serviced by mainstream banks. “We view Avanti's lending activities as inherently higher risk than those of mainstream banks, but expect Avanti's diverse product offering and lack of single name concentration to keep its credit losses relatively stable, albeit elevated relative to New Zealand's banks.” S&P said Avanti's warehouse funding model – securing loans against existing operations – left it susceptible to banker confidence, but the company was making progress to diversify its funding base.
“The stable outlook reflects our expectation that Avanti Finance will maintain a very strong risk-adjusted capital (RAC) ratio of above 15% for the next 12 months, despite continued strong growth in its loan book. “We also expect Avanti to maintain its underwriting standards and pricing for the risks it assumes, and refrain from entering significant new and higher-risk business segments that may expose the company to materially higher credit losses.”
