subscribe to our newsletter
Falling dollar won’t hurt lenders: HSBC

Falling dollar won’t hurt lenders: HSBC

Australian banks that rely on overseas wholesale funding will not be negatively impacted by a weaker Australian dollar.

That is the opinion of HSBC chief economist Paul Bloxham, who told a panel of chief economists at last week’s Finsia annual conference that banks actually don’t carry foreign exchange exposure in their overseas wholesale funding contracts.

“All of that funding it hedged back into Aussie dollars,” Mr Bloxham said.

“The banks actually don’t carry the foreign exchange exposure; they have hedged it back against those longer-term contracts for that offshore funding,” he said.

“The currency itself should have very limited impact on the story.”

In recent months the majors have led the charge of record-low interest rates by issuing money into the wholesale market cheaply – the five-year swap rate is down to just over three per cent.

However, over the past five years banks have been reducing their exposure to wholesale offshore markets, Mr Bloxham said.

“What was around about 30 per cent of their funding back in 2008 is now back to perhaps around 20 per cent of their funding,” he said.

A bigger concern than the falling Aussie dollar is if economic conditions in Europe deteriorate, Mr Bloxham added.

“If those markets became less liquid over time it might be tougher for Australian banks to get into those markets at a reasonable price,” he said. “But that is not apparent at the moment.”

 

Falling dollar won’t hurt lenders: HSBC
mortgagebusiness logo

Latest News

The rapid growth in dwelling values over the past decade is unlikely to be replicated in the near future given current housing market cond...

A new study from the Reserve Bank of New Zealand (RBNZ) seeks to demonstrate how applying limits to loan-to-value ratios (LVR) helped de-ris...

Delinquencies on prime residential mortgages are rising while those on non-conforming mortgages are falling, the latest data from Standard...

Promoted Stories

podcast

LATEST PODCAST: Wayne Byres on mortgages, trusted brands and broker remuneration

Do you expect access to credit to get harder this year?