Powered by MOMENTUM MEDIA
subscribe to our newsletter

Aussie banking system ‘remains in good shape’

The Reserve Bank of Australia has said that the nation’s banks remain “well placed to address the risks they face” despite their performance having deteriorated from a “very strong position” this year.

According to the RBA’s Financial Stability Review, which is released semi-annually, the Australian banking system remains in good shape after efforts to strengthen its resilience.

The report pointed out that this is against a backdrop of the banks’ domestic assets performance having “deteriorated a bit” this year from a “very strong” position.

“The weakening has been evident in both banks’ consumer and business lending portfolios, and has been concentrated in mining-related industries and regions … these factors resulted in a marked increase in the charge for bad and doubtful debts in the most recent half,” the report said.

“Rising bad debt charges have, in turn, contributed to bank profits declining recently to levels of around two years ago,” it added.

Advertisement
Advertisement

However, the report highlighted that despite this slight deterioration, Australian banks’ tightening of lending standards has contributed to a slowing in the pace of overall credit growth over the past six months.

“As a consequence, the Australian banks continue to be well placed to address the risks they face,” it said.

The report showed that the major banks have increased their resilience to liquidity shocks over recent years, which will likely be strengthened by the implementation of the Net Stable Funding Ration (NSFR) from 2018.

“Access to long-term debt funding has been favourable for Australian banks this year, and they have used this opportunity to raise considerably more funding from debt markets than in recent years, often at longer tenors,” the report said.

Housing loan performance

PROMOTED CONTENT


The report noted that a deterioration in housing loan performance has been “most pronounced” in Western Australia and Queensland.

However, it stated that the pick-up in the non-performing housing loans ratio has been almost entirely in ‘past-due’ rather than ‘impaired’ loans, which suggests that banks generally expect to recover the full amount of the loans.

“Growth in banks’ domestic loan books has slowed over the past six months, partly reflecting the tightening of standards in some segments,” the report said.

“Future asset performance will largely depend on the evolution of macroeconomic conditions, especially conditions in property markets.

“Nonetheless, the considerable strengthening of housing lending standards over the past year or so should assist with future loan performance,” the report concluded.

[Related: Analysis: Are the big four’s ‘easy days’ really behind them?]

Aussie banking system ‘remains in good shape’
mortgagebusiness

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Early bird tickets are on sale now. Work smarter, not harder, this year.

Latest News

The total value of residential dwellings rose by almost $450 billion in the March quarter to surpass $8 trillion for the first time, accordi...

Consumers signalled stronger intentions towards home buying in May, as the big four bank has predicted house prices are set to increase by m...

Westpac Group has announced that it is creating more than 300 new roles (including lending and credit assessor roles) in Adelaide. ...

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.