APRA cautions banks on poor commercial property lending

APRA cautions banks on poor commercial property lending

10 March 2017



According to Brandon Khoo, Executive General Manager at APRA, commercial property lending has historically been a source of significant loss for banks, both in Australia and overseas.

In response to recent market dynamics and indications that underwriting standards were under competitive pressure, he said that “APRA undertook a thematic review of commercial property lending over 2016. As part of this review, APRA assessed the
portfolio controls and underwriting standards of a number of larger domestic banks and
foreign bank branches.”

According to the review, Boards should actively challenge whether expectations of growth in commercial property lending are achievable, given the position in the credit cycle, without compromising the quality of lending.

APRA’s review also revealed that the ability of the Board and senior management to fully understand and challenge the risk profile of lending has often been hampered by
inadequate data, poor monitoring and incomplete portfolio controls.


To read the full report, click here.