(28 February 2012 – Australia) The credit rating of three of the ‘big four’ Australian banks was cut by a notch by ratings agency Fitch.The downgrade was largely as a result of reliance on offshore borrowing to fund lending books, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac had their long-term default ratings cut to AA-.
This follows Standard & Poor’s rate cut of all four banks to AA- in November.
Reserve Bank of Australia (RBA) governor Glenn Stevens called into question the rating agencies’ assessment of the banks, saying ‘BHP can borrow cheaper than the four largest banks, even though, according to the rating agencies, they are riskier credit’.
‘That gives an assessment as to what the market’s assessment is of the rating agencies’ relative assessment of those two groups,’ he told the Parliament’s economics committee last Friday.
‘There are corporates who are, at least at face value, riskier credit propositions, according to the rating agencies who can borrow cheaper than the banking system.’