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Australian banks 'benefitting' from Europe woes

19 october 2011, 18:56
0
The Reserve Bank of Australia building in Sydney. ©AFP
The Reserve Bank of Australia building in Sydney. ©AFP
Australian banks were much less stressed by the eurozone's debt woes than their European counterparts and were even benefitting in some cases, AFP reports, citing a central bank official Wednesday.

Assistant Reserve Bank of Australia governor Guy Debelle said local banks were better insulated since the global downturn, with deposits outstripping credit growth for the past two years, reducing their need to borrow.

The central bank's provision of liquidity to Australian lenders had been little changed in recent times and Debelle said it saw "little sign of strain or counterparty concern in the local interbank market."

"We are not seeing the same sort of stresses for the Australian banks, as are present for some of the European banks," Debelle said in speech in Sydney.

"The Australian banks' funding structures are considerably more resilient to periods of stressed markets than they were previously."

Australian banks had benefitted from the redirection of US money market funds out of the troubled eurozone, he added, and local dollar liquidity was available from the central bank if US dollar markets froze up.

"In contrast to the recent experience of some European banks, the Australian banks have found that US money market funds (MMFs) have been more than willing to maintain their exposures, including at longer maturities," he said.

"Indeed, recently the Australian banks have been beneficiaries of a reallocation by the MMFs away from the European banks."

Debelle said the global banking system was under "intense" scrutiny due to concerns about the eurozone's fiscal stability, with interbank lending costs rising sharply since May, when anxiety peaked about Greece.

"The cost of European banks borrowing from each other in the short-term unsecured market has risen to its highest level in the post-Lehman period, reflecting heightened counterparty concerns," he said.

But moves by the European Central Bank to boost short-term liquidity meant the region's banks "should not have difficulty in sourcing euro funding for some time to come, provided they hold the appropriate collateral."

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