OPINION: Bankers and regulators insist the Australian banking system is in excellent shape despite the nerves stalking global markets and the fears that there will be further banking crises requiring instant action to avoid wider damage.
Australians’ obsession with the vicissitudes of the housing market is logical given the impact of eye-watering prices and debt levels in an era of rapidly rising interest rates.
What will happen to US economic growth as bank credit increasingly dries up is fast becoming a central concern in markets, even overtaking inflation as the main worry for fund managers according to a monthly global survey by Bank of America. With the US Fed and other central banks raising rates so rapidly, the vulnerability of these regional banks was most dramatically exposed by the fate of SVB. While the Federal Reserve and government actions to protect depositors averted the danger of widespread bank runs spreading quickly, it has not avoided a major shift of customers to bigger banks.
Still, Anna Bligh, CEO of the Australian Banking Association, argues the whole financial sector is on high alert. “I think the Australian banking system is a credit to the policy frameworks [and] is in an extremely strong position. I would say uniquely, globally,” he said. Australia’s degree of insulation from global volatility is due in part to strict regulatory requirements for all banks to maintain high capital buffers. That is bolstered by still very low rates of problem loans and the continued ability to access cheaper domestic deposits rather than wholesale markets for most of their funding.
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