ABA CEO Simon Birmingham interview on ABC Radio National Breakfast

E&OE 
Radio Interview 
ABC Radio National Breakfast
28 November 2025 

Topics: APRA’s debt-to-income ratio caps change; Lending practices; Refunds on low fee accounts

Sally Sara (Host): Sally Sara with you for breakfast. The banking regulator APRA has fired warning shots at major lenders this week, following an uptick in riskier forms of lending as interest rates have fallen. From February next year, Australian banks will soon get new rules that limit how many high-risk large home loans they can issue to customers. It comes after the total value of new investment loans rose almost 18% to almost $40 billion in the September quarter alone. Simon Birmingham is the Chief Executive of the Australian Banking Association – of course a former federal government minister with the coalition – Simon Birmingham, welcome back to Radio National Breakfast.

Simon Birmingham (Guest): Good morning. Sally, it’s great to be back with you.

Sally Sara: Can you start by explaining what exactly the loans are that seem to be in the sights of the banking regulator, APRA.

Simon Birmingham: Thanks Sally. Well, APRA seeks to maintain a banking system in Australia that is unquestionably strong, to use their words, and that is safe and secure for all. And what they announced yesterday is for the first time, the application of debt-to-income limit in terms of loans provided by Australian banks. And that limit is to ensure that there is a cap of 20 per cent of loans that banks write in relation to borrowers where they are not writing loans above six times the income of those households.

So, what does that mean? In simple terms, it means that if you’ve got a household income of $100,000 and then the borrowing limit applied would be $600,000 or a household income of $200,000 the borrowing limit applied would be $1.2 million in the main but noting there is that up to 20 per cent capacity for banks to still go above that in terms of the value and volume of loans they write.

Sally Sara: What makes those kinds of loans particularly risky?

Simon Birmingham: Well, obviously the serviceability and the ability to repay those loans always varies. The lower a loan relative to someone’s income, the easier they will find it to repay. The bigger a loan relative to someone’s income, the tighter it is in terms of repayments. But it’s important to stress this is a very much a pre-emptive move by APRA. They’ve been clear that overwhelmingly, banks are not at or near that 20 per cent limit, that there are only very few and in terms of public information available, and none of the major banks are at or near that. So, there is still quite significant headroom for banks and borrowers to get flexibility without creating the type of risk that APRA is seeking to avoid.

Sally Sara: You’re listening to Simon Birmingham, the Chief Executive of the Australian Banking Association. When we’re looking at this current situation, there’s recently been a surge in videos online advising Australians how to set up a company and trust account their property portfolios from banks and maximize leverage. How concerning is that?

Simon Birmingham: I think we’re always on the lookout for things that may increase risk. But at present, Australian banks see very low levels of default or of stress. People do face stress, they should always reach out as soon as they can to their bank, because there are ways to work through those issues. But people should understand that the rules that are in place, applied by banks and by regulators are designed not just to keep our financial system safe, but also to protect people. It’s really critical when APRA are making these rules that they’re also conscious of keeping people within the banking system – a safe and secure banking system – where possible, and not necessarily driving people into riskier products or riskier non-bank lending opportunities. But this type of behaviour is certainly something to be monitored, and is monitored carefully by the industry, as well as the regulators.

Sally Sara: An investigation, following an investigation by ASIC, the Commonwealth Bank has refused to reimburse $270 million in excessive fees it charged vulnerable customers. Should the CBA pay up?

Simon Birmingham: The CBA has directly responded to those questions. Matt Comyn, the CEO, appeared before a parliamentary committee last week, as did other major bank CEOs and went through where they have paid compensation, where they are looking at paying compensation, and so I think they’ve detailed clearly how they’re responding to that in relation to payments to vulnerable, Indigenous customers and others, where they think that is the appropriate thing to do, even if no rules were broken at the time.

Sally Sara: But other big banks have reimbursed customers. Why shouldn’t the CBA?

Simon Birmingham: Well, it’s a matter for individual banks, clearly if rules are breached, then penalties apply and repayment should occur where things have operated in accordance with terms, conditions, other rules and guidelines. Then banks will make their decisions according to how they might view these matters in relation to other parts of their customer relationship or responsibility. And CBA has stepped through their handling of that, of which I understand, they still indicate they are assessing some other customers.

Sally Sara: So, do you think that’s okay if they don’t pay up all of those?

Simon Birmingham: Well, Sally, as I said, they’ve indicated they’ve repaid some, they are working through some others. These are matters that they’re assessing in relation to their customer relationships and what’s clear is that all must uphold the rules and conditions of the terms they apply. All must live and work by the standards that they sign up to in the banking code and that are applied by regulators, and we expect that to be the case. Where things fall out of those areas then, then it’s a matter for individual banks to work through when it comes to those customer relationship pieces.

Sally Sara: Simon Birmingham, thank you.

Simon Birmingham: Thanks, Sally my pleasure.

Ends