RBA tells banks not to be strict after rates cut

Bloomberg

Australia’s central bank joined the government in warning lenders not to be too strict when assessing borrowers, fearing such caution could dent an already slowing economy.
“It is important that banks are not overly cautious in the implementation of current lending policies,” the Reserve Bank of Australia said in its Financial Stability Review. “Lending always entails a degree of risk but excessive risk aversion by financial institutions can curtail the provision of credit that facilitates economic growth.”
Australia’s major banks have tightened lending assessments over the past two years to meet regulatory action on responsible lending and after sharp criticism from an inquiry into financial services’ misconduct. With the economy slowing, the concern from government and businesses is that banks have become too cautious.
Central bank governor Philip Lowe has cut interest rates three times this year to a record low of 0.75% and said he’s prepared to loosen again. That’s a switch from the focus on financial stability that defined the start of his tenure, with the latest move coming just weeks after he warned peers at the Jackson Hole symposium that easier monetary conditions will “push up asset prices, which brings its own set of risks.”
The RBA’s latest comments come despite increasing signs housing markets in the nation’s largest cities are beginning to take off again.