Thursday, 19 May 2011

Thumbs Down for Aussie Banks


Moody's Investors Service has downgraded the long-term debt ratings of Australia's big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

Australia's banks have typically relied on overseas credit markets to finance much of their lending, such as for new mortgages. The ratings cut by Moody's - which brings it in line with Standard & Poor's - may make it marginally more expensive for the banks to tap funds overseas.

To the tune of over $1Trillion gross and $650B net foreign debt. Onya lads.


Cash-strapped borrowers and tight-fisted mortgage insurers are a greater threat to Australian banks than previously thought, says a major ratings agency.

New information shows that Australian mortgage insurers, which secure loans for banks and other lenders, do not always pay the full outstanding amount of mortgages when they fall over which can leave banks out of pocket, according to ratings agency Fitch.

Based on its findings, Fitch moved 54 tranches of residential mortgage backed securities (RMBS) from ratings watch "stable" to "negative". Mortgage backed securities are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders.

"While the LMI providers in Australia and New Zealand have shown a willingness to pay valid claims, recent years' surveillance data show that not all claims are paid-in-full,” said Natasha Vojvodic, head of Australian structured finance at Fitch.

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