The NAB has 40 postcode 'red-zones' where it's about to clamp down on lending

Fresh from trying to de-risk its balance sheet by raising rates on investment loans and capital from the market comes news this morning that the NAB is sufficiently worried about the risks associated with personal and business lending in some parts of Australia it has ‘red-flagged’ 40 postcodes for personal and business loans.

Fairfax reports this morning that the NAB has selected these locations which it believes are at “higher risk of default because areas over-rely on single industries for growth, have high unemployment, or property prices have run too hard”.

NAB hasn’t disclosed the postcodes and that is a fairly broad set of criteria meaning they could be anywhere in Australia. But, with unemployment high and slowing coal mining being an important driver of jobs areas in the Hunter Valley of New South Wales are likely to be on that list.

Other regions that have surged on the back of the mining boom across Australia are also likely to be on the list.

The NAB’s chief risk officer David Gall said that when risks are assessed as higher, the NAB adjust its loan to valuation ratios on affected suburbs.

“One of the things that we definitely factor in is where there is actually higher unemployment, or a risk of higher unemployment, given the reliance on single industries for a town or region. We will also look very closely at areas that have had very dramatic increases in property values to consider what is the right ongoing LVR ratio as well,” he said.

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