A leading institutional investor has put lenders on notice that the investment community will be watching carefully to see how they adjust their policies and processes in response to the removal of responsible lending obligations from the National Consumer Credit Protection Act.

The executive director of debt investment at IFM Investors, Lillian Nunez, said her team would be looking at what each lender does in response to the change, with a view to the likely impact of any changes on the performance of credit assets in its portfolio.

She said IFM’s view of lending standards includes an environmental, social and governance lens.

Speaking at the Australian Securitisation Forum’s Virtual Symposium, Nunez said: “In the past we have had to consider the issue of predatory lending. We would like to think the amendments will not weaken standards in that area.

“We are comfortable with what we have seen so far but we will be talking to lenders about their plans. We would like to think it is not going to be a significant change.”

APRA executive director, policy and advice, Renee Roberts, said the new regime would be based on APRA’s prudential standard, with ASIC regulating non-ADIs “the way we would do things”.

Roberts said: “We look at things more at the entity and system level, not so much at the borrower level. To get a perspective on compliance we will be looking for feedback from the Australian Financial Complaints Authority.”

Roberts said she expected there would still be a role for income and expenditure benchmarks such as the Household Expenditure Measure.

“It will still be incumbent on lenders to do enough to satisfy themselves that the borrower can service the loan. HEM is a good benchmark for testing what the borrower is telling the lender,” she said.

APRA will make some minor adjustments to its credit risk management standard APS 220 to accommodate the government’s policy but Roberts said it will wait until the amendment goes through.