Analyzing Developer Lending After the Royal Commission in Australia

This report examines the impact of the Royal Banking Commission on developer lending in Australia. The commission's stringent inquiry procedures and compliance checks have led to a credit crunch, affecting developers, builders, and potential homebuyers. Big banks have revised their lending policies, while small banks and second-tier lenders are benefiting. The report discusses the commission's recommendations, the responses of developers, and the role of sophisticated investors. It highlights the decline in housing prices and sales, and the challenges faced by developers in securing loans. The report concludes that the Royal Commission has significantly reshaped the lending landscape, with lasting effects on the construction and housing industries. The report uses references to support the analysis.

Developer Lending from Bank
after the Royal Commission

Introduction
 Primary role of Royal
Banking Commission is to
ensure that the Australian
major banks and financial
institutions.
 In 2009, a major
reformative change related
to ethical standard in the
banking industry was
brought by way of the
National Consumer credit
Protection Act.

Introduction (contd)
 AMP Personal Banking
was the first among the
many casualties who
stood down which
disseminated a paranoia
within the banking and
financial industry.

Inquiry Affecting the Application for
Loan as well as the Lending Policy
 The stringent inquiry
procedure and compliance
check started by the Royal
Commission is proving to be
detrimental to the homebuyers,
developers and new
businesses.
 The lending buffer time has
been extended to complete the
overall procedure

(contd)
 Introduced to ensure
that the borrowers do not default
their loans.
 Such an approach has affected the
lending and borrowing capacity and
the availability of money for lending.
 Small bankers and second-tier
lenders are rejoicing due to the
stringent condition of the big banks
who are being scrutinised by the
Royal Commission.

(contd)
 70% of the borrowers are now approaching to the small banks for
borrowing.
 Revision of the lending policy by big banks in order to fulfill the criteria
of Royal Commission

Credit Crunch Hitting the Developers
 The developers are the one who
are among the most affected
 A credit crunch that has hit the
builders, developers as well as
other investors that has led to the
fall of the construction industry
 Housings are facing a decline in
the price due to the withdrawal of
the foreign buyers due to higher
prices and taxes.

(contd)
 A falloff 9% in the dwelling
house sale in the last financial
year
 borrowers having a sizable
deposit can expect to receive a
good deal from the bank

(contd)
 the developers and the builders are
also asked to bring in more
documents supporting their reliability
to return the lending.
 property developers has been facing
a hard time to borrow.
 While, small developers were not
facing as much issue like the giant
developing moguls.

Approach of the Royal Commission
 Kenneth Hayne, the commissioner
of the Royal Commission in his final
report held that the Commission do
not recommend the banks to tighten
their grip pertaining to the banking as
well as lending standards.
 The Royal commission intends to
improve compliance of the provisions
of National Consumer Credit
Protection Act

The after-math of the release of the
Commission’s final report
 The Treasurer pledged to
follow and implement the
recommendations and
policy laid down by the
Kenneth Hayne
Commission.
 The developers in the East
Coast have taken the
decision to keep their stock
on hold and put the
apartments on hold, rather
than selling them out on a
lower price.

(contd)
 sophisticated investors’
are taking the advantage
of the situation and are
taking an active role as
syndicate lenders
 Companies like Chifley
that are enjoying a growth
pertaining to the lending
business