The Major Banks of Australia have made some massive announcements surrounding COVID-19. Thanks to the strength of our banks and Australian Government we should see a gradual economic recovery. Banks have essentially built a bridge for Australia to overcome the financial ramifications of COVID-19 and its effects on the Australian economy. The banks should be commended on their efforts in accommodating many Australians who are doing it tough right now.
Statistics have reported 3% of Australians were behind with their mortgage payments and 20% of households have only enough funds to live from week to week. In comparison with last year, our major banks have performed $14.5B less this year. A huge decrease of over 40%, and these figures don’t even take into account the month of April. To put it in football terms, the banks are “getting flogged” at the moment.
Positive outcomes of COVID-19 for Lending Services in Australia
The good news is our government along with the banks are focusing on recovery. Although decision-making has not been perfect, the Australian Government has made a mighty effort in supporting the economy in these unprecedented times. They have provided $300B to help stimulate the economy and accelerate the projected recovery towards the end of this year. One of the positive outcomes for the economy from COVID-19 is the consumer and commercial use of online channels making business more efficient than ever before.
Strengths of the Australian Banks
Our banks no doubt, are in uncharted territory and it has been a test of the bank’s resilience. However, we must recognise the balance sheets of our banks are very solid and strongly capitalised in terms of liquidity with their funding matrix comfortably inside the regulator’s minimum requirements. In context, I would much rather be in the Australian economic jurisdiction than any other jurisdiction in the world right now. Thanks to the strength of the banks and the regulations put in place following the last global financial crisis we could see the Australian economy in a strong position for the country’s economic recovery.
Current Lending Provision for Equipment Lending/Asset Finance
We need a balanced process in regard to the bank’s financial recovery. We need to be sure to still extend credit to the economy so that it has ability to grow. But the provisions and rules of credit worthiness must be higher than before COVID-19 pandemic to ensure we minimise credit impairment. This has been demonstrated in the asset finance and equipment lending space over recent weeks. With changes in appetite for certain industry lending and maximum exposure limits being reduced along with reducing maximum loan size, lending has changed with COVID-19. WillFinance has found that fast track lending applications and low doc applications have either been put on hold for all new to bank customers and lenders or require more prudent verification of credit worthiness. The 24 to 48 hours for finance approval seen in the past is now being pushed as far back as 92 hours with some lending institutions.
Understandably, many equipment finance lenders now want more understanding of how the borrower has been affected by COVID-19. Lenders are requesting confirmation that the borrower has sufficient cash, working capital and work in progress to trade through a 6-month downturn whilst still maintaining payments to their lenders. These updated lending provisions are vital to the country’s economic recovery. For more information surrounding the changes to current lending procedures for Australian financial institutions please contact us at WillFinance.com.au.