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The Constant Development of Non-bank Lending Institution

Updated: Oct 2

More concerned about the market knows that, for various historical reasons, tends to follow the pace of development of financial markets in the northern hemisphere on the overall development of Australia's financial markets. The current development trend of the financial industry also confirms this law. In the past decade, an important trend in the European financial system is reappearing in Australia.



The turning point and impact of the change


In our view, Australia's real estate loan industry has always been dominated by the four major banks.


However, at the end of 2017, former Australian Prime Minister Malcolm Turn-bull called for the establishment of a Royal Commission to conduct a 12-month investigation of the banking industry to detect chaos and illegal operations in the banking, pension and financial services industries. During the investigation, the committee held a total of 68 days and 7 rounds of public hearings; a total of 10,323 public submissions were received, of which 61% were in the banking industry, 12% in the pension industry, and 9% in the financial consulting industry; Mainly involved in personal financial management, pension and small business financing and other businesses.​


About the Royal Commission​


The Royal Commission is an ad hoc public investigative agency, the highest form of public investigative agency established by Commonwealth countries to investigate specific issues. As an institution independent of the government and openly investigating key issues, all established royal commissions have clear scope of powers and investigators. It should be pointed out that the Royal Commission is regarded as the "last resort" for investigating major issues and will only be established when other relevant agencies are not suitable for investigation. Once the Royal Commission is activated, the government cannot stop it. Therefore, the government usually sets the terms of authorization very carefully and usually includes a date by which the committee must complete.


The committee subsequently submitted an investigation report to the Australian Federal Parliament in February 2019. Since then, it has also strengthened the supervision of the financial industry, urging existing banking institutions to urgently re-balance their lending guidelines and risk appetite.


Insight​


There is an ancient poem that describes this exactly. "What is the most prophet, arrogantly contends for it." The financial industry is undoubtedly the most sensitive to policy. This series of events and operations naturally quickly triggered fundamental structural changes in the Australian mortgage market. Of course, these major changes will not be a one-off opportunity, but will have long-term effects on many large financial institutions:


In addition to the significant increase in the cost of compliance in the financial industry, the mortgage market, which is critical to bank profitability, is also slowing down significantly. It has become more difficult to apply for mortgages from banks, and it has also affected the real estate market.


In the short term, the market's demand for funds cannot be met in a timely manner through traditional banks. But in the long run, this is a great opportunity to cultivate more high-quality non-bank lending institutions, bridge the gap between market capital supply and demand, improve market competitiveness, and create more opportunities for many small and medium-sized enterprises. More financing channels and options will further promote the stable development of the Australian economy.


Future market trends and characteristics


In fact, it was no coincidence that non-bank institutions appeared from the beginning. In the past five years, non-bank lending institutions have entered a "lucky" period of continuous rise, and there is no sign of slowing down so far.


Benefit of Non-bank institutions


  1. More flexible: Due to the fast execution and convenient transactions of non-bank lending institutions, more and more customers who have practical experience in the field of loans and investment and pursue benefits tend to choose non-bank institutions.

  2. The price advantage is more obvious: With the gradual maturity of the non-bank credit industry, more and more overseas capital has flowed in and competition has become more intense. The continued reduction in financing costs will help expand market share through the formation of more attractive loan products.


This is undoubtedly a big advantage for investors and borrowers who want to seize business opportunities. The rising trend of this industry will inevitably attract more investors to enter the market. Sufficient capital liquidity will revitalize the overall economic market, allowing more borrowers to obtain suitable funds for business development and various investments. This is a virtuous circle! In this virtuous circle, the non-bank loan market has gradually matured. As an important participant in the development trend of non-bank loans, KBRZ can bring you more benefits.



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