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The Australian financial system remains one of the most robust in the world, according to a new report.
Moody's latest Asian Banking System Outlook, released yesterday, said the industry forecast for Australia’s banking system is negative but the system itself remains “very sound”.
“While funding costs have risen as a result of the crisis and competition for deposits is high, pre-provision bank margins are improving as the banks are better able to price for risk,” Moody’s said.
Retail loans were unlikely to create the same degree of stress for Australian banks compared to the rest of the developed world, the ratings agency said, but the business / corporate sector’s performance would be the swing factor in Australian banks’ asset quality.
“While Australian banks' corporate exposures are skewed towards stronger companies – many of whom have recently raised capital – single-name concentration risk is relatively high, creating some sensitivity to event risk,” Moody’s said.
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