Banks relaxed about economic downturn

The major banks say that not only do they have things well in hand in terms of their corporate exposure but are even more confident in their ability to absorb any downturn that may occur in the property market.

According to Westpac chief executive David Morgan, property has a consistent track record with real house prices coming down after share prices decline, with a variable lag on average around six months. He did not cite any concerns over the bank's loan book.

Similarly, Commonwealth Bank does not see a need to tighten its key assessment criteria such as loan-to-valuation ratios noting that many customers were repaying more than they need to.

As InfoChoice noted in August, many consumers are taking advantage of the low interest rates to pay off their loans faster after learning smarter repayment strategies such as making repayments weekly or fortnightly rather than monthly, or making one-off lump sum payments.

Westpac marketing general manager Peter Hanlon said there was no plan to change any policies and the bank was keeping a close eye given the current question marks over the economy although he noted that the bank's loan-to-valuation ratios had been tested in “very negative conditions”.

The Australian, Tim Boreham 24/9/01