27 August 2015
Heidi Richards, General Manager, Industry Analysis - Senate Standing Committee on Economics: Inquiry into Matters Relating to Credit Card Interest Rates, Sydney
Thank you for the invitation to appear before the Inquiry today.
APRA is the prudential regulator of banks and other authorised deposit-taking institutions (ADIs) as well as insurance companies and regulated superannuation funds. Our role relative to the matters under review by this Inquiry relates to APRA’s prudential oversight of those credit card issuers that are ADIs.
There are currently more than 150 ADIs, and many of these offer credit card products. Credit card lending is a relatively small part of ADIs’ overall business, with balances outstanding at ADIs comprising around $40 billion or 2 per cent of total loan portfolios.
In this regard, our primary objective is the financial safety of individual ADIs and the stability of the financial system. A key focus of our prudential supervision activities is on ensuring that ADIs maintain sound lending standards. Oversight of market conduct and the application of responsible lending obligations are matters primarily for ASIC. Pricing decisions made by ADIs, such as those on credit card interest rates, do not generally give rise to prudential concerns, and therefore are not generally within the scope of APRA’s prudential supervision activities.
From 2003 until last year, APRA administered a regime to authorise and supervise Specialist Credit Card Institutions, or SCCIs, as a special class of ADIs. This policy was implemented under the RBA’s credit card access regime, which was designed to promote competition from non-traditional players by facilitating access to the credit card schemes. The take-up of this regime within industry was never particularly strong. As a result, following a review by the RBA, the Government removed the requirement for card issuers and acquirers to be ADIs, and the SCCI framework was abolished from 1 January 2015. As a result, non-prudentially regulated companies may enter the credit card business.
We would be happy to answer any questions.