- Westpac CEO Brian Hartzer has spectacularly claimed that some of Australia's most successful business icons, including Seven Network's Kerry Stokes, Merivale hotel mogul Justin Hemmes and fashion designer Carla Zampatti wouldn't have a chance today of getting the loans they needed to launch their empires.
- Hartzer made the remark as he levelled criticism at the tightening of credit restrictions in Australia, following the financial services royal commission.
- He warned that the restrictions could seriously impair the national economy as spending continues to dry up.
What do media mogul Kerry Stokes, Merivale hotelier Justin Hemmes, designer Carla Zampatti and Mirvac CEO Susan Lloyd-Hurwitz all have in common?
Fame and fortune? Sure. Business success? Certainly.
But it's the fact that all four wouldn't have a chance of getting a loan today, according to Westpac CEO Brian Hartzer.
The boss of one of Australia's largest banks bemoaned the restrictions now placed on lenders in the wake of the financial services financial royal commission.
"It’s clear from Reserve Bank data that demand for credit has slowed – the rate of mortgage growth is at an unprecedented low, and lending to businesses has grown only marginally compared to this time last year," Hartzer told a Tran-Tasman Business Council lunch on Tuesday.
That's bad news for an already-slowing Australian economy.
While admitting there are several factors behind the slowing demand, Hartzer singled out the extra pressure banks' lending has come under, especially in the last year or so.
The lending regulator APRA has loosened some of the restrictions it has imposed but still requires banks to only lend if a customer can make their repayments at an interest rate 2.5% above current levels. That's despite the RBA signalling interest rates will remain low for years to come.
The unintended consequences of restricted lending, Hartzer said, "pose a danger for our economy".
"Why? Because highly prescriptive, micro-prudential regulation reduces lenders’ ability to exercise judgement in helping customers reach their aspirations," he said.
At this point, Hartzer turned almost sentimental as he boasted that Stokes, Hemmes, Zampatti and Lloyd-Hurtiwz -- all customers whom Westpac had helped finance early on -- would be denied loans if they tried the same thing today. In short, there would be no Seven Network, no Merivale bars or restaurants, and no Carla Zampatti.
"Kerry Stokes summed it up beautifully recently. He said to me, 'If we end up with only prescriptive regulation on credit policies, and no human touch, no entrepreneurial spirit, nor a continuing human support system provided by the lender, we will lose the next generation of budding businessmen and women'," he said.
Westpac, along with the other major banks, was raked over the coals by the Kenneth Hayne royal commission. Twelve months of intense scrutiny saw the banks rush to comply more closely with responsible lending laws, as regulators were instructed to do their job and keep financial institutions honest.
"The Royal Commission highlighted that financial institutions were not paying enough attention to the protection of vulnerable customers. This is a matter of deep regret for us and we have changed our policies, processes, and training to better identify and support customers experiencing vulnerability or hardship," Hartzer said.
But banks have learned their lesson, he insisted, saying it was time banks were given a break.
"(But) banks want to lend. It’s a big part of why we exist, and how we make money. And we want to do it responsibly. It’s simply not in our interest to give a loan to someone who can’t pay it back."
While few are going to lose sleep over the bottom line of big banks, a lack of credit could seriously hurt the Australian economy and that's a concern for everybody.