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Economics

Bank Downgrades > What they had hoped for?

BIG4Australia’s big four banks have had their credit ratings downgraded, by the most influential of the three global credit ratings, Standard & Poor’s.

The latest move was of none of their wrongdoing, rather because of S&P changing the way it rates companies to make it easier to compare them around the world following the Global Financial Crisis.

But, could this be the excuse the banks are looking for, not to pass on any interest rate cut in full, if the Reserve Bank goes that way next week.

Overnight, S&P downgraded the credit ratings for ANZ, NAB, Westpac and the Commonwealth by one notch to AA-. Macquarie was revised down by two notches to BBB.

It follows a similar move on in international institutions like Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley.

The move may increase borrowing costs at a time one of the banks blamed the higher cost of funding for not passing on November’s interest rate cut in full.

Aussie banks rely on credit markets for about 40 per cent of the funds they use for lending and that’s one of the reasons S&P citing for its move.

Still, S&P notes “Our assessment of the Australian banking industry is underpinned by the country’s conservative and comprehensive regulation, and the banking sector’s very low risk appetite.”

Let’s see what the banks have to say about it, but I get the feeling we might not hear anything until after Tuesday if the RBA moves.

MEMO

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  1. Pingback: RBA > Santa comes early, for some « MEMO>ricardo - December 6, 2011

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