The Australian Prudential Regulation Authority ('APRA') recently released its quarterly property exposure data for domestic and foreign authorised deposit-taking institutions ('ADIs').
Navigating a pandemic - A financial system vaccine
Our September quarter update is released as Australia emerges from its first recession in almost 30 years.
A record surge in consumption drove a 3.3% rise in GDP over the three months to September, after plunging a record 7.0% in the June quarter. This positive result occurred sooner than some expected and, in conjunction with other key indicators and vaccine progress, has prompted hope the recovery may be faster than what had been forecasted.
Nonetheless, the recovery is likely to be uneven across industries and demographics. APRA's capacity to closely supervise lenders' capital reserves and portfolio mixes remains as critical to the financial system during the recovery as it has been during the depths of the pandemic.
Vaccinating the financial system
Our two prior publications outlined how APRA's capital and credit control initiatives, in concert with other statutory authorities and government bodies, sought to buttress Australia's financial system against a 'blackswan event', drawing on lessons from the GFC.
We explored how in recent years, APRA-imposed regulations caused banking system capital adequacy ratios to build up to historically high levels, with a view to that resilience being available to be utilised in times ofcrisis. COVID-19 was such a time.Among the most significant measures APRA took was to allow banks and other authorised deposit-taking institutions, or 'ADIs' (such as credit unions or building societies), to 'stop the clock' on the counting of arrears.
With economic growth returning, improvements being recorded in the labour market and key leading indicators, it is timely to observe and consider the critical support banks have provided the economy.
APRA-led initiatives targeting a stronger, more resilient banking system implemented over the past decade have allowed ADIs to absorb $266 billion in deferred payments over the pandemic, equal to over 10% of all lending.
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