Pepper hits back at increased regulation in the same week that it announces a 20% profit
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Pepper hits back at increased regulation in the same week that it announces a 20% profit
Extending APRA’s powers to cover non-banks could lock some borrowers out of the housing market, non-bank Pepper has warned in an extraordinary outburst.
The claim was made in Pepper’s submission to the Treasury regarding the Treasury Laws Amendment (Non-ADI Lender Rules) Bill 2017. “We think the government should be very focused on the consequences for ordinary Australians, particularly self-employed, blue collar, migrant families, and first home buyers,” noted the submission, “without non-bank lenders like Pepper, borrowers like these who have the capacity to repay, but who the banks will not lend to, will be disenfranchised.”
Pepper claims more than a quarter of their borrowers are self-employed, adding that they have experienced just 0.1% cumulative losses in $7.2bn in lending over six years.
In a separate submission alongside Liberty, Firstmac and RESIMAC, Pepper called for limits on APRA’s ability to regulate non-banks. “Given the nature of a non-ADI lender and its industry, the rule making and enforcement power needs to be more specific, and different from the prudential standard and oversight approach taken with ADIs,” the joint submission argued.
28.3m reasons to protect non-banks
With half-year profits of $28.3m, up 20% on the previous year, Pepper has a major incentive to defend the status quo.
Yesterday Mortgage Choice revealed that non-banks’ market share had doubled in two years, helped, ironically, by APRA restrictions on ADIs lending to investors, pushing these clients to non-banks
APRA oversight of non-banks could threaten future results, warns Pepper: “if an investor thinks that the regulatory landscape could change overnight as a result of APRA making an order under the proposed legislation, they may either choose not to invest, or they will increase their price to account for that additional risk.”
In particular, Pepper point to a change APRA made in 2008 to residential mortgage backed securities, which reduced the value of investments held by investors. Pepper needs the support of investors to securitise its loans, as do several other non-banks.
Would APRA actually use their powers?
The banking sector has experienced major interventions by APRA in recent years, including limits on investor and interest-only lending.
However, it’s not clear that APRA is looking to apply similar rules to non-banks. Appearing before the Senates Estimates Committee in late May, APRA chairman Wayne Byres explained that “if there is a systemic risk…APRA would have the capacity to introduce some rules which might help mitigate that. But that is very different to saying we take day-to-day responsibility for individual institutions.”
Furthermore, ASIC will continue its supervision of the sector, which is established in the NCCP.
Extending APRA’s powers to cover non-banks could lock some borrowers out of the housing market, non-bank Pepper has warned in an extraordinary outburst.
The claim was made in Pepper’s submission to the Treasury regarding the Treasury Laws Amendment (Non-ADI Lender Rules) Bill 2017. “We think the government should be very focused on the consequences for ordinary Australians, particularly self-employed, blue collar, migrant families, and first home buyers,” noted the submission, “without non-bank lenders like Pepper, borrowers like these who have the capacity to repay, but who the banks will not lend to, will be disenfranchised.”
Pepper claims more than a quarter of their borrowers are self-employed, adding that they have experienced just 0.1% cumulative losses in $7.2bn in lending over six years.
In a separate submission alongside Liberty, Firstmac and RESIMAC, Pepper called for limits on APRA’s ability to regulate non-banks. “Given the nature of a non-ADI lender and its industry, the rule making and enforcement power needs to be more specific, and different from the prudential standard and oversight approach taken with ADIs,” the joint submission argued.
28.3m reasons to protect non-banks
With half-year profits of $28.3m, up 20% on the previous year, Pepper has a major incentive to defend the status quo.
Yesterday Mortgage Choice revealed that non-banks’ market share had doubled in two years, helped, ironically, by APRA restrictions on ADIs lending to investors, pushing these clients to non-banks
APRA oversight of non-banks could threaten future results, warns Pepper: “if an investor thinks that the regulatory landscape could change overnight as a result of APRA making an order under the proposed legislation, they may either choose not to invest, or they will increase their price to account for that additional risk.”
In particular, Pepper point to a change APRA made in 2008 to residential mortgage backed securities, which reduced the value of investments held by investors. Pepper needs the support of investors to securitise its loans, as do several other non-banks.
Would APRA actually use their powers?
The banking sector has experienced major interventions by APRA in recent years, including limits on investor and interest-only lending.
However, it’s not clear that APRA is looking to apply similar rules to non-banks. Appearing before the Senates Estimates Committee in late May, APRA chairman Wayne Byres explained that “if there is a systemic risk…APRA would have the capacity to introduce some rules which might help mitigate that. But that is very different to saying we take day-to-day responsibility for individual institutions.”
Furthermore, ASIC will continue its supervision of the sector, which is established in the NCCP.
