(Reuters) - Australia's corporate watchdog on Tuesday said it had lodged an appeal against a court decision dismissing its accusations that the nation's second-biggest lender Westpac Banking Corp <WBC.AX> had approved mortgages without appropriate credit checks.
Last month, the Federal Court ruled against the Australian Securities and Investments Commission (ASIC), saying Westpac had obeyed the law when approving 262,000 home loans using an automated system to estimate expenses.
The case is widely seen as a test of a government drive toward closer scrutiny of the financial sector after a public inquiry last year found widespread wrongdoing.
Westpac did not immediately respond to a Reuters request for comment on Tuesday.
In the earlier ruling, Judge Nye Perram found that Westpac did not breach any responsible lending provisions of the Credit Act by using the automated system rather than manually checking each applicant's living expenses.
Citing the judge's decision that a lender "may do what it wants in the assessment process", ASIC said the Act also requires lenders to make "reasonable enquiries about a borrower's financial circumstances" and verify information before deciding whether or not a loan is suitable for them.
"ASIC considers that the Federal Court's decision creates uncertainty as to what is required for a lender to comply with its assessment obligation, nor does ASIC regard the decision as consistent with the legislative intention of the responsible lending regime," said ASIC Commissioner Sean Hughes.
The regulator had initially begun Federal Court proceedings against Westpac in March 2017.
(Reporting by Rashmi Ashok in Bengaluru; Editing by Clarence Fernandez and Christopher Cushing)
