Banks keep taking risks on offshore market funding: Fitch
The Australian banking system’s reliance on wholesale funding from offshore markets remains a key risk to its stability in 2011, according to a new report.
The Fitch Ratings report on Australia’s big four banks found that while they appear well positioned for the year ahead, their reliance on continued access to offshore markets for funding could prove risky in the short to medium term.
Fitch’s Financial Institutions group director, Tim Roche, said that the main reason Australian banks retained access to wholesale funding markets during the global financial crisis (GFC) was their asset quality.
“Nevertheless, the banks remain reliant on offshore wholesale markets, reinforcing the importance of maintaining strong balance sheets to ensure continued access,” he said.
To address this reliance, the report noted that Australian banks had increased their focus on deposit-gathering, reduced reliance on short-term wholesale funding, increased duration in long-term wholesale portfolios and further diversified those portfolios.
Banks have also strengthened their capital and liquidity positions, both in response to the GFC and in the anticipation of the implementation of the Basel III liquidity changes.
Despite improved performance during 2010 largely due to significant reductions in impairment charges, the report found that in 2011 operating profit growth was likely to moderate due to subdued system credit growth.
Recommended for you
Two commentators have shared why cultural alignment can be the biggest deal breaker when it comes to advice M&A and how to ensure a successful fit.
Formal education has played a large role in enhancing the advice profession over the last decade but, with the bar now so high, two advisers debate whether it is necessary to complete additional study.
With an abundance of private market options coming to market, due diligence becomes increasingly important as advisers separate the wheat from the chaff, adviser Charlie Viola has said.
The Treasury has launched a consultation into how the $47 million special levy for the Compensation Scheme of Last Resort will be funded.
