Moody’s Cuts Ratings of Australia’s Big Four Banks

Steven Bobson, Europe & Americas Editor
May 18, 2011 /

As the US Treasury debt garnered a negative assessment from Standard & Poor’s (S&P) when the US government decided to increase its budget cut for the next twelve years by $4 trillion last month, rating agency Moody’s also reduced the credit ratings of Australia’s big four banks, Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia, Westpac Banking Corp. and National Australia Bank, for the reason that they were relying too much on international lending markets.

The said banks’ ratings were cut by them from Aa1 to Aa2.

They have been put under a negative ratings watch since February which focused on observing the international wholesale funding market and how it influences the Australian banks.

Moody’s found out in its review that the four banks are exposed to shifts in investor confidence because of their funding issues.

The entire outcome of the watch is summarized in Moody’s Sydney Office’s Senior Vice President Patrick Winsbury’s statement which said that Australia’s major banks have been in relatively high levels of wholesale funding and that global financial crisis is underlining the speed with which shifts in investor confidence impact bank funding.

The current banking situation of Australia is related to the global credit crunch and subsequent economic slowdown in 2008 that knocked down many of the world’s biggest banks. The event resulted in other banks looking for ways of raising funds in a less volatile manner and increasing their deposits to limit exposure to international lending markets.

The downgrade brought Moody’s to the same line with the Standard & Poor’s and Fitch rating agencies.

However, Moody’s acknowledged that despite the rating decrease, the affected Australian banks were stable and Australia’s lending system was supported.

 

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