IMF gives nod of approval to Aussie banking sector
(19 November 2012 – Australia) The International Monetary Fund (IMF) judged Australia’s banking sector to be "sound, resilient and well managed" but said there was room for improvement.
The fund ranked the nation’s banking sector as one of the most concentrated in the world, noting the sector’s dominance as a reason the banks are much more profitable here than their global peers.
Future global financial shocks still threaten as the most likely way the economy will be impacted – via the banking system, with the big four seen as ‘‘systemically important’’ – meaning their health or otherwise has a major impact on the economy.
‘‘Significant and protracted difficulties in any one of them would have severe repercussions for the entire financial system and, in turn, the real economy,’’ the fund said.
The IMF said requiring banks to hold more capital so they could absorb losses would be the best way to shelter the economy from any troubles in the banking sector and would seem the "natural next step to take".
This issue is currently being considered by the Australian Prudential Regulation Authority (APRA).
The IMF suggested that APRA dedicates more resources to stress testing the banks and that the Reserve Bank of Australia (RBA) should establish its own stress-testing framework "to identify and monitor emerging systemic risks."
Future global financial shocks still threaten as the most likely way the economy will be impacted – via the banking system, with the big four seen as ‘‘systemically important’’ – meaning their health or otherwise has a major impact on the economy.
‘‘Significant and protracted difficulties in any one of them would have severe repercussions for the entire financial system and, in turn, the real economy,’’ the fund said.
The IMF said requiring banks to hold more capital so they could absorb losses would be the best way to shelter the economy from any troubles in the banking sector and would seem the "natural next step to take".
This issue is currently being considered by the Australian Prudential Regulation Authority (APRA).
The IMF suggested that APRA dedicates more resources to stress testing the banks and that the Reserve Bank of Australia (RBA) should establish its own stress-testing framework "to identify and monitor emerging systemic risks."
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