© Reuters. FILE PHOTO: A house is inundated by floodwaters, following heavy rains and extreme flooding within the McGraths Hill suburb of Sydney, Australia, July 6, 2022. REUTERS/Loren Elliott/File Photograph
(Reuters) – Potential financial downturns brought on by local weather change might pose dangers to the mortgage books of Australia’s prime 5 banks with out leading to any extreme stress to the system and the economic system, a danger examine performed by the nation’s banking regulator confirmed.
With world focus sharply pivoting in direction of local weather change, banks have come beneath elevated scrutiny for his or her ties with fossil gas tasks, prompting them to set objectives to chop emissions and lift investments in clear power tasks.
The Australian Prudential Regulation Authority (APRA) stated on Wednesday dangers related to local weather change for banks had been prone to be concentrated in particular areas and industries, with mortgage lending losses anticipated to be larger in northern Australia.
The examine predicted financial institution losses might be larger from lending to sectors that extra uncovered to dangers related to transition to a decrease emission economic system, equivalent to mining, manufacturing and transport.
The examine was performed over the previous two years on the monetary fashions of Commonwealth Financial institution of Australia (OTC:), Nationwide Australia Financial institution (OTC:), Westpac Banking (NYSE:) Corp, Australia and New Zealand Banking Group, and Macquarie Group (OTC:).
These banks have “predicted they might regulate their danger urge for food and lending practices, equivalent to reducing again on excessive loan-to-valuation lending and lowering publicity to larger danger areas and industries”, the regulator stated.
APRA will now think about how the evaluation might be utilized to different regulated industries and climate-related challenges, it stated.
($1 = 1.4948 Australian {dollars})
