Australia's four largest banks had their credit rating cut one notch to Aa2 by Moody's Investors Service due to their reliance on overseas debt markets.
The cut from Aa1 to Moody's third-highest grade "reflects our view of the Australian banking system's structural sensitivity to conditions in wholesale funding markets," Patrick Winsbury, a senior vice president at Moody's in Sydney, said in a statement.
Australia's biggest banks - four of the 14 lenders in the world with a AA rating or better from Standard and Poor's - largely remained profitable through the financial crisis as the economy
avoided recession and the government introduced guarantees to support debt sales.
Moody's move brings its rating on the lenders in line with SandP's assessment. Shares of the lenders - Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group, and National Australia Bank - declined after the news. The Australian dollar erased gains to trade at $1.0633.
The banks have "relatively high levels of wholesale funding - at about 40 percent of liabilities on average," Mr Winsbury said today. "The global financial crisis has underlined the speed with which shifts in investor confidence can impact bank funding."
A day after Moody's said it was reviewing the banks' ratings, Commonwealth Bank CFO David Craig said on February 17th the move was a "storm in a teacup."
Bloomberg