Australia: Trends in Australian loan markets and the role of alternative lenders

Last Updated: 21 May 2019
Article by Rommel Harding-Farrenberg

What is the state of play in Australian loan markets right now and what is the outlook for the foreseeable future for corporate and institutional borrowers and alternative online finance?

While regulatory headwinds stirred up by the Banking Royal Commission and the recent increase in market risk capital requirements for banks by the Basel Committee will no doubt have an effect on the lending landscape, all indications are that demand from alternative lenders will continue to increase.

2018 saw a strong syndicated loan market in Australia, with great support for investment grade credits. The availability of credit at this level was high and spread across industries. Key features were the volume of underwritten loans (from both banks and institutional investors), driven by acquisition finance and stable market conditions (in contrast to the periods of volatility which at times closed down activity in the Australian bond markets).

Demand from institutional investors (such as Metrics Credit Partners and super funds) continued to grow and extended to unrated borrowers. These conditions resulted in important upside for borrowers, including:

  • competitive pricing across all sectors, and in particular for infrastructure borrowers, with pricing up to 30 basis points inside the broader market;
  • support for longer tenors;
  • headroom in financial covenants and debt-sizing criteria; and
  • a number of self-arranged transactions.

Thus far, 2019 has seen a variety of Asian banks establishing or (together with certain European Banks) expanding operations in Australia, coupled with the trend of increased participation by institutional investors.

Conditions at the start of 2019 were very strong, particularly for corporate borrowers of good standing. This was illustrated early this year by the Australia Pacific LNG (APLNG) refinancing, which was oversubscribed by more than 100%, leading to a request for, and receipt of, better terms and pricing.

However, syndicated lending in the Asia Pacific (excluding Japan) in the first quarter of 2019 dropped by almost 40% – despite the fact that event-driven financings in Australia have been healthy. The trade war between the US and China and concerns about the global outlook appear to have resulted in some borrowers adopting a wait and see approach.

Outlook for corporate and institutional borrowers

Regulatory headwinds stirred up by the Banking Royal Commission will no doubt have an effect on the lending landscape. For example, among Australian banks, tighter lending standards and improved ethical behaviour could perhaps result in lower loan volumes.

In addition, the Basel Committee increased its minimum capital requirements for banks for market risk in January and again in February this year. The result of this is that bank regulators (including APRA) will be expected to require an increase in in total market risk capital requirements relative to the Basel 2.5 framework. While the increase does not commence until January 2022, banks are beginning to take compliance steps. The effect of this on loan markets is not clear at this stage. However, it could have an effect on availability of bank credit, in particular for longer tenors.

Nevertheless, all indications are that demand from alternative lenders will continue to increase for the remainder of this year and the foreseeable future, as funds they have under management or access to increase. Thus, while the make-up of lending syndicates may change, the availability of loan credit is expected to continue. The question is whether there will be any gap as a result of the changing environment for the banks.

Now would be an opportune time for borrowers to consider taking advantage of the liquidity available in the market to refinance debt on improved terms and, prior to any potential downside from the recent decisions by the Basel Committee, potentially expand their universe of financiers beyond traditional bank lenders.

Outlook for alternative online finance

According to the 3rd Asia Pacific Region Alternative Finance Industry Report, Australia is the largest alternative (online) finance market in Asia Pacific (excluding China) with 36 platforms and over US$1.14 billion raised in 2017. The largest share of market volume came from balance sheet business lending, followed by P2P/market place consumer lending. Invoice trading was the next largest segment of the market.

While the amount raised in 2017 is small in the context of the corporate and institutional market, the Report notes that the average growth rate in 2017 was 88%.

Could the online alternative finance market become a viable source of funds beyond SMEs? The next few years should answer that question, and it would certainly be worthwhile keeping an eye on developments in this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions