A non-bank-style lender with $100 billion in assets and broker-originated mortgages accounting for 95% of its loan book has spent several years materially overstating one of banking’s core resilience metrics. The regulator only learned of the problem when the lender flagged it in July 2024.
That timeline matters as much as the penalty. APRA has now imposed a $50 million operational risk capital add-on and lifted minimum liquidity requirements while an independent review plays out, but the breach itself, ING’s liquidity coverage ratio dipping below the 100% floor at certain points while the bank reported around 160%, went undetected through standard supervisory processes until the institution itself came forward.
What the LCR measures and why it matters for deposit-funded lenders
The liquidity coverage ratio calculates whether a bank holds enough high-quality liquid assets to cover 30 days of expected cash outflows under stress. For deposit-funded mortgage lenders with no physical branch network, that stress scenario hinges on how fast customers can move money out through apps and online platforms.
ING’s business model, high savings rates to attract deposits, broker-driven mortgage origination, minimal physical infrastructure, makes deposit volatility the primary liquidity risk. When the reported buffer sits at 160% but the real figure falls below 100%, the gap between perceived and actual resilience becomes a solvency question if a run starts.
The breach occurred across multiple reporting periods. APRA’s statement describes it as serious rather than administrative, which signals the regulator views the miscalculation as a governance and control failure, not a spreadsheet error.
The regulatory oversight gap
APRA’s framework relies on self-reported prudential data, with on-site reviews and thematic assessments layered on top. The fact that a major ADI’s liquidity calculations were materially wrong for years without triggering a regulatory query suggests one of two possibilities: either the supervisory model lacks real-time verification mechanisms for this specific metric, or the regulator’s resourcing and prioritisation choices left this institution under-scrutinised relative to its systemic footprint.
ING is Australia’s sixth-largest mortgage lender by book size, grew loans over 11% year-on-year, and serves more than two million customers. That scale puts it well inside the threshold where liquidity risk becomes a financial stability concern, not just an institutional problem.
The breach also raises questions about how APRA supervises liquidity management at digitally native lenders more broadly. Traditional banks with branch networks face different deposit outflow dynamics than app-based platforms where customers can shift balances in minutes. Whether APRA’s liquidity stress assumptions account for that velocity difference, and whether other online lenders are calculating their buffers correctly, remains unanswered.
The catch
- ING’s breach went undetected by APRA until the bank self-reported in mid-2024, despite covering multiple prior reporting periods.
- The capital add-on and higher liquidity floors stay in place until independent reviews confirm fixes are embedded, with no public timeline.
- Broker-originated mortgages make up 95% of ING’s loan book, so any credit tightening flows directly through broker channels and borrower access.
- Other deposit-funded, digitally native lenders face the same deposit volatility risk profile, but no thematic review has been flagged.
What the capital add-on and liquidity floor mean for mortgage settings
The $50 million operational risk capital requirement and elevated liquidity minimums force ING to hold more capital and liquid assets against the same loan book. That increases the cost of writing new mortgages and reduces return on equity for existing loans.
Banks facing higher capital costs typically respond in one of three ways: lift pricing, tighten credit policy, or pull back from higher-risk segments. ING has been competing aggressively on rate to sustain double-digit portfolio growth, and broker feedback through 2024 positioned the lender as a key alternative for borrowers priced out by major bank serviceability buffers.
If ING tightens loan-to-value ratio caps, raises interest rate buffers for serviceability tests, or scales back cashback offers to preserve margins under the new capital settings, the impact concentrates in the segment of the market where borrowers have fewer options. That’s first-home buyers stretching into high-LVR territory, self-employed borrowers relying on broker-sourced alt-doc deals, and refinancers chasing the lowest rate to manage repayment stress.
The timing is particularly poor. Mortgage applications have already collapsed 20% as lenders engage in tactical rate competition, and three lenders recently reversed earlier cuts and lifted pricing as funding costs firmed. If one of the largest non-major lenders pulls back from competitive settings or exits marginal segments, the borrowers who relied on that capacity face a thinner menu of choices.
Brokers have flagged that competition among non-major lenders has been the primary pressure valve for borrowers unable to clear major bank hurdles. Losing a major player, even temporarily while capital and governance issues are addressed, shifts more volume back toward the majors or forces borrowers to accept higher rates from smaller lenders with less competitive pricing.
Who this hits and what changes next
ING’s remediation plan, independent governance review, and assurance process will take quarters, not weeks. APRA’s public statement offers no timeline for lifting the capital add-on or returning liquidity requirements to standard levels, which means the elevated settings could persist well into 2025.
During that window, three groups carry the adjustment cost. Borrowers seeking low-rate refinances or high-LVR purchase loans face reduced capacity if ING scales back volume or tightens policy. Brokers dependent on ING for competitive pricing and credit flexibility lose a key lender option for clients at the margin. And ING’s shareholders and deposit customers absorb the opportunity cost of capital and liquidity tied up in buffers rather than deployed into loan growth or returned as higher savings rates.
The broader question is whether APRA extends scrutiny to other digitally native, deposit-funded lenders with similar business models. If the liquidity miscalculation reflects a systemic issue with how online banks model deposit outflows under stress, a thematic review could force multiple institutions to recalculate their buffers and hold more liquidity. That would tighten credit conditions across the non-major segment simultaneously, amplifying the impact on borrowers who rely on competition outside the big four.
Alternatively, if this is genuinely an ING-specific governance failure and other lenders’ calculations hold up under scrutiny, the market adjusts around one constrained player rather than a sector-wide reset. Borrowers and brokers will know which scenario is playing out based on whether APRA announces a broader liquidity review in the next quarter.
Scenarios
Base case: ING completes remediation over six to nine months, holds elevated capital and liquidity through mid-2025, tightens credit policy modestly but remains active in broker channels. Borrowers see slightly higher rates or lower LVR caps from ING but find substitute capacity at other non-majors. The breach remains institution-specific, and no thematic review emerges.
Upside: ING accelerates fixes, APRA lifts restrictions by early 2025, and the lender resumes competitive rate settings without lasting policy tightening. Other digitally native lenders face no additional scrutiny, and broker-sourced credit capacity remains stable.
Downside: Remediation uncovers additional governance weaknesses, APRA extends restrictions into late 2025 or beyond, and ING materially scales back origination volume or exits high-LVR lending entirely. Alternatively, a thematic review forces multiple non-major lenders to recalculate liquidity buffers and hold more capital simultaneously, reducing credit availability across the segment just as borrowers face the steepest refinance cliff from 2021-2022 fixed-rate expiries rolling off.
Practical take
If you’re refinancing or purchasing in the next six months and ING was part of your rate comparison, check whether broker feedback signals any policy tightening or reduced appetite for your profile. If you’re borderline on serviceability or LVR and relying on a non-major lender, lock pre-approval now rather than assuming settings will hold.
Brokers should track whether other deposit-funded lenders face similar scrutiny or adjust liquidity settings preemptively. If capacity tightens across multiple non-majors simultaneously, major bank pricing becomes the floor rather than the ceiling for many borrowers, and serviceability buffers that were previously optional become binding constraints.
Watch for APRA’s next public statement on whether this breach triggers a broader liquidity review. That announcement, or its absence, will clarify whether the ING penalty is an isolated event or the leading edge of a sector-wide recalibration.
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General info, not financial advice.
