find the latest legal job
Freelance Lawyers
Category: Banking and Finance Law | Location: All Perth WA
· Freelance opportunities through Vario from Pinsent Masons
View details
Freelance Lawyers
Category: Other | Location: All Adelaide SA
· • Qualified lawyer with a strong academic background
View details
Freelance Lawyers
Category: Other | Location: All Melbourne VIC
· • Qualified lawyer with a strong academic background
View details
Insurance Lawyer (1 PAE)
Category: Insurance and Superannuation Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Great Career Opportunity ·
View details
Insurance and Health Lawyer (1-4 PAE)
Category: Insurance and Superannuation Law | Location: Melbourne CBD & Inner Suburbs Melbourne VIC
· New position to support Growth ·
View details
Credit growth fears for Australian banking sector

Credit growth fears for Australian banking sector

FITCH RATINGS has ranked Australia's banking system as among the safest in the world, but there are fears that real exchange rate growth could be an issue here.Fitch has developed two measures…

FITCH RATINGS has ranked Australia's banking system as among the safest in the world, but there are fears that real exchange rate growth could be an issue here.

Fitch has developed two measures of banking system vulnerability. The Banking System Indicator (BSI) measures banking system quality and strength. The Macro Prudential Indicator (MPI) meanwhile, which looks at the extent to which credit growth, asset prices, and the real exchange rate render the banking system potentially vulnerable to asset price and exchange rate corrections and the consequent economic fall out.

The indicators are then pooled to create a Systemic Risk Matrix, which gives an overall picture of the health of the banking system. Stronger systems are able to withstand shocks, but in weaker systems, even a modest shock or increase in stress could cause a full-blown systemic crisis that will exhaust much or all capital in the system and will require financial support from either the government or shareholders.

Fitch found that the majority of global banking systems show few signs of vulnerability to MPI, but Fitch's early warning model has concerns for Australia. The pace of private sector credit growth is above trend in Australia and significantly above the real interest rate. While the rises are not critical, Fitch said there is potential for future problems unless there is a moderation in credit growth.

But beyond the credit issue, Australia's banking sector is classed as “very high quality”, an accolade shared with the US, UK, Luxembourg and the Netherlands. The worst performing major economy was Japan, whose system is classified as “low quality”. Only 11 systems are deemed worse — all from emerging markets.

“Banking crises have affected almost 100 countries in the past 25 years and can have a major impact on sovereign and bank ratings,” said Richard Fox, senior director in Fitch's sovereign group. “This new methodology will help identify potential problem situations which could lay countries open to future systemic distress.”

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weeklys sister publication.

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

Credit growth fears for Australian banking sector
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Quentin Bryce
06:05
DV has worsened in a generation: Quentin Bryce
Former governor-general of Australia Dame Quentin Bryce AD CVO has spoken of her deep distress about...
Lawyers
06:00
Academics entertain the idea of law without lawyers
Researchers from Queensland will explore some of the most disruptive trends tipped to transform the ...
Please, Continue (Hamlet), Melbourne Festival
Oct 16 2017
Hamlet suffers slings and arrows of top Victorian barristers
Victorian judges and barristers have performed the unique play Please, Continue (Hamlet) at the Melb...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...