Banks adopting more prudent lending practices

9 December 2009 | by Caroline Munro

David Bell

Banks will be engaging in more prudent business lending practices in the current economic climate, according to Australian Bankers’ Association chief executive David Bell.

Speaking at an ABA and member banks business roundtable in Cairns yesterday, Bell said the current economic conditions will mean that banks will be tightening up on their requirements – in that they may require more information, covenants or new conditions of businesses seeking to refinance or apply for a loan.

“It is important that banks continue to make prudent decisions on lending,” he said. “Obviously it does not make business sense to lend to a customer who cannot repay the loan. We need to remember the vital role played by sound lending in restoring economic growth, and we must work together to get through these difficult times.”

Bell said businesses that are doing it tough should contact their bank to work out a strategy for keeping on top of their loan. He added that many banks have specialist staff that assist customers who experience hardship.

Add a comment3 Comments

Glen | 10 December, 2009 at 04:27 PM
Why is 97% on residential lending 'an outright disgrace', Mike?? I borrowed 97%, it just meant I could get into the market earlier instead of spending another few years saving. The money I would have needed to save for a bigger deposit just goes toward my mortgage instead. Being able to borrow 97% and get into the market enabled me to pick up $70,000 in equity on my property in the last few years. I have no problem making the repayments, so how is a disgrace?
Mike | 9 December, 2009 at 01:00 PM
What about residential lending. Seeing some of the lending practices in this sector makes me sick. People can still get a 97% lend from some institutions. An outright disgrace!!!
Chris Grenfell | 9 December, 2009 at 11:17 AM
Oh David Bell, where have you been for the past couple of years? "Banks WILL be adopting far more prudent business lending practices"? They've been doing that for at least twelve months if not the past couple of years. But then, the Australian Bankers Association never was one to come out with mind boggling, edge of your seat style announcements

Tags: Australians Bankers Association | bank lending practices | business lending | David Bell