NAB's CEO Andrew Thorburn: Home-lending curbs could hit the wrong target

Australian regulators need to be careful tougher home-lending curbs don’t lock people who can afford to buy a house out of the property market, the chief executive officer of National Australia Bank Ltd. said.

The Australian Prudential Regulation Authority last month tightened restrictions on interest-only home loans, which are favoured by property investors, as surging home prices stoke concern of a housing bubble.

“They are trying to fight a fundamentally momentum-driven phenomenon,” National Australia Bank CEO Andrew Thorburn said in Sydney on Tuesday, pointing to rapid population growth and low interest rates as key factors driving demand. “We have to be careful that we don’t over-react.”

Small business and infrastructure groups need to become involved in the debate over longer-term solutions to housing affordability, he said.

“In a way we haven’t heard the voice of the people,” Thorburn said, citing the example of someone who is “kept out of the market because of these rules and they see prices continuing to go up.”

National Australia, which reports half-yearly results next month, is the country’s biggest business lender. Over the past 18 months it has sold overseas assets and restructured to focus on retail and corporate banking in Australia.

Customer Satisfaction

As part of the domestic push, it has also rejigged how the executive team are measured: all now have customer-satisfaction metrics, Thorburn said. The weekly executive meeting starts with a look at customer feedback across the branch network, he said.

Like Australia’s other big banks, National Australia is dealing with the fallout from a series of customer advice scandals, which have dented the industry’s reputation and led to calls for a wide-ranging Royal Commission into the finance industry.

Thorburn said focusing on customer service would ultimately improve culture, improve the bank’s reputation and boost the bottom line, though it will take time. “If you really want to change the culture it takes years. We can’t lose focus.”

This story was first published by Bloomberg.