Co-operation on funding to aid smaller lenders during COVID-19

8 April 2020

The ACCC has granted interim authorisation for members of the Australian Securitisation Forum (ASF) to work together to assist smaller lenders to maintain liquidity and issue loans to consumers and small businesses during the economic disruption caused by the COVID-19 pandemic.

This follows the announcement of the federal government’s $15 billion Structured Finance Support Fund (SFSF), which will allow smaller authorised deposit-taking institutions (ADIs) and non-ADI lenders to access funding at competitive prices. The SFSF will be administered by the Australian Office of Financial Management (AOFM).

The interim authorisation will allow ASF Members to coordinate their input about how the scheme will be administered.

“The Structured Finance Support Fund is likely to be more quickly and effectively implemented when members of the ASF are allowed to work together to support the Australian Office of Financial Management in administering the fund,” ACCC Chair Rod Sims said.

“Many Australian smaller businesses and individuals rely on small lenders. Quick and effective implementation of the SFSF will help ensure that small lenders can continue to support these businesses by offering affordable credit during this very difficult time.”

“It’s also crucial that competition in the loans market in Australia is maintained. The competition provided by small lenders needs to be supported to help mitigate the economic impact of COVID-19,” Mr Sims said.

The ACCC has authorised the ASF and its members to discuss how the AOFM should administer the SFSF, including providing their views to the AOFM about developing measures for issuing new debt, arranging appropriate funding arrangements, allowing for hardship relief for borrowers and ensuring the continued flow of funding to smaller lenders.

The AOFM will keep the ACCC informed about any developments arising out of these discussions.

“It is important to note that ASF members are not authorised to exchange information about margins, costs, repayment terms or specific offers to customers. This is aimed at ensuring competition between lenders continues,” Mr Sims said.

Having granted interim authorisation for the arrangements, the ACCC will now seek feedback on the application for final authorisation which is sought for a period of 12 months. More information, including the ACCC’s statement of reasons, is available at Australian Securitisation Forum.

Background

The ASF is the industry body for participants in securitisation and covered bond markets in Australia. The ASF’s members include authorised deposit-taking institutions (ADIs), non-ADI lenders, investment banks, investors and service providers such as trustees, accountants and lawyers.

Securitisation is the process of converting a pool of illiquid financial assets into tradeable securities, such as mortgage- or asset-backed securities. Securitisation allows lenders to access finance to support the issuance of loans.

The federal government set up the Structured Finance Support Fund (SFSF) in March with initial funding of $15 billion. The SFSF will be managed by the Australian Office of Financial Management (AOFM) which will invest in wholesale funding markets used by small lenders to finance loans.

The AOFM is an Australian government agency tasked with ensuring that the Government’s financing needs are met cost effectively and that debt portfolio management reflects the importance of the sovereign bond market in Australian financial markets.

The federal government has required the AOFM to prioritise investments in the securitisation market that are likely to promote competition.

The COVID-19 pandemic has affected securitisation markets, including by increasing the risk of loan defaults and in a tightening of available finance to support the issuance of loans.

Notes to editors

ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

Section 91 of the Act allows the ACCC to grant interim authorisation when it considers it is appropriate. This allows the parties to engage in the proposed conduct while the ACCC is considering the merits of the substantive application.

Broadly, the ACCC may grant a final authorisation when it is satisfied that the likely public benefit from the conduct outweighs any likely public detriment.

The ACCC may review a decision on interim authorisation at any time, including in response to feedback raised following interim authorisation.

Release number: 
70/20
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