Shadow bank loans surge to $28b amid APRA crackdown
Australian Financial ReviewSep 21 2017 6:00 PM
Jacob Greber
Tougher bank lending rules have driven an increase in shadow banking, according to RBA research that suggests unregulated loans to developers may amount to as much as $28 billion.
While the Reserve Bank's cautious that there are no hard numbers on the sector, its own talks with industry players suggest there has been an increase in lending to property developers outside the traditional banking system since 2014.
Even though shadow banks still account "for only a small" portion of residential mortgage lending, loans to property developers may have reached $28 billion, which is what managed funds lent to non-financial corporations.
Another measure cited by the Reserve Bank in its latest quarterly bulletin suggests registered financial corporations' share of residential property development loans has risen to a little under 4 per cent in the second half of last year from zero in 2011.
"Shadow bank lending can play an important role in the economy, but on a large enough scale it could damage financial system resilience," officials at the Reserve Bank said in the report.
A lack of clear data about the sector prompted the government in the May budget to announce laws that would force non so-called authorised deposit-taking institutions, or ADIs, to register their activities with regulators.
Risky investment
Shadow banking has the potential to stoke risky investment in the property market that the Reserve Bank and other regulators are moving to crack down on.
In the bulletin on Thursday, the Reserve Bank expressed concerns about the challenges of "monitoring the size and growth of shadow bank lending to property".
It said credit providers are charging around 15 per cent or more to lend to developers as banks reduce their exposure amid growing fears of an oversupply of apartments in markets such as Brisbane.
They said despite lack of clear data, shadow banking still happens with some regulatory oversight because "banks continue to provide senior debt to these developments".
Officials endorsed the government's push to legislation greater data collection.
"This would be an important step to enhance the ability to monitor these activities and assess their impact on financial stability."