Good work from Chris Joye today:
One significant concern relates to record unofficial arrears in illiquid and subordinated bonds comprising “securitised” portfolios of Australian home loans, SME loans and consumer loans that are packaged up and sold to investors through residential mortgage-backed securities (RMBS) and asset-backed securities (ABS). We are particularly anxious about RMBS and ABS issued by non-bank lenders, which are not actively supervised by Australia’s tough banking regulator that mandates minimum lending standards for deposit-takers.
Non-banks typically target borrowers who cannot get finance from normal banks, which often means consumers with higher default risks. If around 10 per cent of all bank borrowers have been forced on to loan repayment holidays, it is reasonable to assume that non-banks will be suffering from similar, if not worse, arrears.
