{"id":8012,"date":"2009-09-24T19:33:58","date_gmt":"2009-09-24T23:33:58","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=8012"},"modified":"2009-09-24T19:33:58","modified_gmt":"2009-09-24T23:33:58","slug":"why-were-australian-banks-so-resilient","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=8012","title":{"rendered":"Why Were Australian Banks So Resilient?"},"content":{"rendered":"

I will admit that I’m very unfamiliar with the Australian bank market, but the Reserve Bank of Australia has released<\/a> its September 2009 Financial Stability Review<\/a>:<\/p>\n

A number of interrelated factors have contributed to the relatively strong performance of the Australian banking system in the face of the challenges of the past couple of years. One is that Australian banks typically entered the financial turmoil with only limited direct exposures to the types of securities \u2013 such as CDOs and US sub-prime RMBS \u2013 that led to losses for many banks abroad. Moreover, they have typically not relied on the income streams most affected by recent market conditions: trading income only accounted for around 5 per cent of the major banks\u2019 total income prior to the turmoil. Banks\u2019 wealth management operations have been affected by market developments, but the major banks still reported net income of around $2.3 billion from these activities in the latest half year.
\nOne reason why Australian banks garnered a relatively low share of their income from trading and securities holdings is that they did not have as much incentive as many banks around the world to seek out higher-yielding, but higher-risk, offshore assets. In turn, this was partly because they were earning solid profits from lending to domestic borrowers, and already required offshore funding for these activities. As a result, Australian banks\u2019 balance sheets are heavily weighted towards domestic loans, particularly to the historically low-risk household sector.<\/p><\/blockquote>\n

As discussed in detail in the previous Review, there are several factors that have contributed to the relatively strong outcome in Australia, including:<\/p>\n