Westpac is set to soon stop new lending to SMSFs.
According to reports Westpac will stop new SMSF Limited Recourse Borrowing Arrangements (LRBAs) at the end of July.
Westpac told ABC Radio National:
“In order to simplify and streamline our self-managed super fund product we’ll be withdrawing from sale our SMSF home loan product and business lending to SMSFs, effective Tuesday 31 July 2018. We will continue to service and support our existing customers.”
There are many potential motivations for Westpac to stop new lending to SMSFs. The Banking Royal Commission is set to start holding public hearings into superannuation on August 6. But Westpac told the ABC that it had commenced a review of the products before the Royal Commission started. ASIC has also been concerned about aspects of lending to SMSFs. Actions by APRA may have also impacted the willingness of the banks to lend to SMSFs.
The Financial System Inquiry had recommended the prohibition on most borrowing by super funds be reinstated, which would have stopped SMSF LRBAs. Though this recommendation was rejected by the Government.
Westpac ceasing lending to SMSFs will leave the Commonwealth Bank as, reportedly, the only major bank still lending to SMSFs.