Nobel Finance Sydney – Money Matters Newsfeed

Australia’s major banks continue to perform well despite ongoing funding challenges, according to Fitch Ratings.

Fitch director Tim Roche said despite some deterioration, Australian bank asset quality remains sound.

“It is one of the main reasons why the major banks have retained access to wholesale funding markets during the crisis,” he said.

Nevertheless, Mr Roche said the banks’ reliance on offshore wholesale funding means they remain vulnerable to future disruptions in global markets.

Fitch expects asset quality deterioration to continue to moderate through the remainder of 2010 and into 2011, barring a significant weakening in the global economic recovery.

At the same time, a sharp rise in house prices over the past year may indicate a level of overheating in the housing market; however underwriting standards appear sound, with banks having tightened them since 2007.

Furthermore, the risk of material loss from the mortgage portfolios is largely mitigated through the use of lenders’ mortgage insurance.

Fitch’s long term IDR outlook for ANZ is ‘positive’ with a AA- rating, while CBA, NAB and Westpac have a ‘stable’ outlook, with a AA rating.

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Australian banks could survive an economic contraction the size of the 1990s recession, the Australian Prudential Regulation Authority (APRA) has revealed. According to reports, APRA chairman John Laker ordered a stress test to be conducted to determine what would happen if there was a three? year deterioration in global economic conditions. The
Reserve Bank of Australia and New Zealand’s central bank also took part in the examination. Laker told The Australian Financial Review the results showed Australian banks had the capital resources to weather such a contraction. In fact, none of the 20 banks tested would have failed or even fallen below the minimum amount of top?rated assets on their balance sheets. However, he warned banks not to get complacent and take part in the high-risk activities that caused the economic downturn overseas.

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