Aussie banks better placed to face volatile times

Confronted by renewed global uncertainty, the Australian banks that tap offshore wholesale markets are now better placed than they were before the global financial crisis to withstand potential disruptions, according to the Australian Prudential Regulation Authority (APRA).

APRA chairman John Laker has told the Senate Standing Committee on Economics that while prospects for the global economy had continued to firm since February with a consequent ratcheting up in gross domestic product forecasts in Australia, this had “been obscured by the financial ‘ash cloud’ over Europe”.

“Concerns about the public finances of Greece and other European countries, about the exposures of European banks and about Europe becoming a dragging anchor on global recovery have led to a renewed bout of turbulence in global financial markets, particularly foreign exchange and equity markets,” he said.

Laker said Australian banks had only small exposures to countries in the Euro area and, although spreads had been widening, global funding markets to date “had been more discerning about the fundamental strength of our banks”.

“We are continuing to liaise closely with Australian banks that tap offshore wholesale markets and we are satisfied that these banks are much better placed than they were in October 2008 to deal with potential disruptions to these markets,” he said.

Laker said APRA was also monitoring the impacts of recent global and domestic equity market volatility on the life insurance and superannuation industries and believed these impacts were being well managed.