Regulators to meet lenders amid COVID-19 fallout

  • By Christine St Anne

The Council of Financial Regulators is meeting with major lenders this week to discuss the best approach in supporting both households and consumers amid the disruption caused by COVID-19.

The measures include ensuring the supply of credit and regulatory relief.

In a statement released on Monday, the Council – made up of the Reserve Bank, APRA and ASIC – announced that it was already assessing how the timing of regulatory initiatives might be adjusted to allow financial institutions to concentrate on their businesses and assist their customers.

Key will be ensuring the flow of credit to both affected customers and industries particularly for small businesses as well as regulatory relief.

The Reserve Bank has already announced that it would buy Australian government bonds in the secondary market to ensure liquidity in the system – a move consistent with quantitative easing and a first for Australia.

The central bank will conduct "one-month and three-month repo operations …until further notice", and "longer term repo operations of six-months maturity or longer at least weekly, as long as market conditions warrant."

The Council said that banks and other lenders are therefore encouraged to work constructively with affected customers during any period of disruption.

Already the big four under the umbrella of the Australian Banking Association have moved on that front.

And on Monday, Australia’s fifth largest lender Bendigo and Adelaide Bank announced a range of measures to also assist its customers impacted by COVID-19.

“For their part, APRA and ASIC will take account of the circumstances in which lenders, acting reasonably, are currently operating during the prevailing circumstances when administering their respective laws and regulations,” the statement from the Council said.

Both agencies also stand ready to deal with problems firms may encounter in complying with the law due to the impact of COVID-19 through a facilitative and constructive approach.

In particular, each agency will, where warranted, provide relief or waivers from regulatory requirements.

This includes requirements on listed companies associated with secondary capital raisings, annual general meetings and audits.

ASIC will also work with financial institutions to further accelerate the payment of outstanding remediation to customers as soon as possible.

The Council said it would remain in discussion with each of its members including the government and its international peers.

The Council will have its regular quarterly meeting on Friday 20 March at which the impact of COVID-19 on the financial system will be further discussed. T

The Council and the Australian Treasurer are also holding teleconferences at least weekly.

Another recession likely

Lenders are also set to face another big challenge with UBS forecasting a likely recession and expects more fiscal stimulus measures.

In a client note, UBS economists said that the global pandemic would likely see Australia slump into recession.

UBS also believes that the RBA is likely to pull-forward a 25bp cash rate cut to Thursday, instead of the scheduled meeting in April; taking rates down to 0.25 per cent, it's 'effective lower bound'.

“We still don't expect negative rates, given Governor Lowe previously specified this as "extraordinarily unlikely", UBS said.