Australia’s four largest banks face the prospect of credit downgrade as Moody’s Investor Service has put them on a credit downgrade review, citing too much exposure to the international lending market.
The banks under review are ANZ, Commonwealth Bank of Australia, Westpac and National Australia Bank, all of which currently enjoy the second highest Aa1 rating.
However, Moody’s says that the banks may suffer due to shift in the investor confidence.
The banks have justified the exposure citing funding issues.
The latest review will throw light on the impact of international wholesale funding market on the Australian banks. The global financial crisis has badly impacted a lot of banks worldwide.
Banks have been extra cautious while trying to raise funds and have been avoiding excess volatility in the international lending markets by increasing deposits as a means to reduce risk.
Explaining the rationale behind the move, Patrick Winsbury of Moody’s in Sydney said: “The global financial crisis has underlined the speed with which shifts in investor confidence can impact bank funding, warranting a review”.
Moody’s however acknowledged that the banks to be reviewed are stable and the Australian domestic market supported lending.
“Moody’s anticipates that after the conclusion of the review, their long-term senior unsecured debt ratings – which incorporated the prospect of systemic support – will remain within the Aa category”, concluded the ratings agency.