EU contagion could spread to Aus banks
Thursday 1 December 2011 - by Karina Whalley
Both the domestic economy and banks' fundamentals are strong, according to Moody's, which rates 15 Australian banks.
"We also note the favourable nature of the deposit environment and a creditor-friendly regulatory environment," said Winsbury.
The strong economy will continue into 2012, according to him.
"This dynamic will support the banks' earnings and asset quality, although we anticipate pockets of deterioration in some business lines," he added.
Moody's says that although the Australian banking system is dependent on external wholesale funding which "increases sensitivity to exogenous shocks", major banks are reducing this reliance as deleveraging continues.
The agency said: "Meeting minimum Basel III liquidity ratios will require a meaningful adjustment by the banks.
"In this context, the Reserve Bank of Australia's Committed Liquidity Facility is a solution to the structural inability of Australian banks to meet the Liquidity Coverage Ratio requirement," it added, but said the Australian Prudential Regulation Authority still expects banks to minimise reliance on the RBA facility by restructuring their balance sheets.
"[The banks] have solid common equity bases that will allow them to transition early to the regulator's tougher-than-standard Basel III capital requirements," the agency said.
Australia was handed a coveted AAA rating on Monday by Fitch ratings agency on the back of its strong performance amid the current global economic turmoil.
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