Overview

Response to recent articles on bank lending practices in The Australian

15 June 2012

Macquarie notes several articles published in The Australian over the past several weeks.  The facts are:

  • These articles seek to implicate Australia in the fall-out from the US sub-prime mortgage crisis but the facts simply do not support such a contention.

  • Australia has never had a sub-prime crisis as occurred in the US, Spain, Ireland and other countries. This is borne out by the facts: there was no overbuilding in the Australian residential market; the level of equity in the Australian residential market remains strong unlike many countries where home owners have experienced significant levels of negative equity. No Australian bank suffered losses during the global financial crisis as did many US and European banks.

  • Low doc loans are not sub-prime loans.  They were provided by many lenders in the Australian market from around 2000 onwards.  Low doc loans have long been recognised as a feature of the Australian mortgage market, including by regulators and ratings agencies.

  • Low doc loans were designed to provide funding for the self employed and SME market, a significant component of the Australian economy, and primarily for investment purposes.

  • Macquarie’s verification processes for all types of loans were, and continue to be, in line with industry standards, practices and regulations.

  • Securitisation was, and continues to be, a funding mechanism used by many financial institutions in Australia and globally. There are strict regulatory frameworks and disclosure requirements involved in securitisations. Securitisation arrangements are outlined in disclosure documents which are generally publicly available.

  • Securitisation brought significant competition into the Australian home loan market, driving down interest rates, expanding product innovation, and allowing more Australians to own their own homes.

  • With respect to the specific claims in the published articles, Macquarie does not, and has never, provided sub-prime lending to any part of the market.  Macquarie has previously disclosed this to the market.  It was also disclosed to The Australian, which chose not to publish this fact.

  • Almost 75% of low doc loans issued by Macquarie have now been repaid in full and the principal and interest of the remainder continues to be consistently repaid. Consequently, losses from low doc lending remain very low for Macquarie and Macquarie has met all its obligations to PUMA investors.

  • Macquarie rejects allegations in the published articles that it has been knowingly involved in encouraging or facilitating the falsifying of loan applications.  If a customer has been subject to improper or fraudulent activity by a third party, Macquarie will take steps to resolve their complaints quickly and fairly.