Australian banks may have to rethink mortgages in risk areas -NAB

Australian banks may have to rethink mortgages in risk areas -NAB

WELLINGTON, Oct 18 (Reuters) – Australian banks may have to rethink whether they sell mortgages in areas prone to extreme weather events, the chief executive of the country’s second-biggest lender said on Tuesday as thousands of homes in Melbourne were evacuated.

Ross McEwan, chief executive officer of National Australia Bank Ltd (NAB.AX), told a business lunch in Wellington that as devastating floods become more frequent it raises questions about whether banks will help people buying assets in flood-prone areas and what the cost will be.

“From a banking perspective, if these areas are going to be constantly flooded, do we have a problem with our funding of these areas?” he asked.

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New South Wales, Victoria and the island state Tasmania have all been hit with heavy rains and flooding in recent weeks, which follows flooding in March and April on the east coast of Australia that resulted in A$4.8 billion ($3 billion) in insured damage.

McEwan said that after the bank’s branch in Lismore, New South Wales, was damaged by floods for the second time earlier this year, the company contemplated whether it should reopen.

“Our decision at the end of the day was to support the community and to go back into be the part of the regeneration,” he said.

This year, Commonwealth Bank of Australia released its first climate report, which showed that of its home loan portfolio A$31.2 billion was exposed to increased physical risk whether that be from cyclone, flood or fire.

($1 = 1.5848 Australian dollars)

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Reporting by Lucy Craymer. Editing by Gerry Doyle

Our Standards: The Thomson Reuters Trust Principles.

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