Australian financial regulators are reviewing the nation’s preparedness and management arrangements for future banking turmoil following the speed of recent runs on lenders in Europe and the US.
(Bloomberg) — Australian financial regulators are reviewing the nation’s preparedness and management arrangements for future banking turmoil following the speed of recent runs on lenders in Europe and the US.
“The council is assessing Australia’s crisis management settings to ensure they remain robust in light of international developments,” the regulators said in a quarterly statement on Wednesday. “Communication and coordination arrangements across the council agencies have also been reviewed and updated.”
Australian banks remain well capitalized and resilient and weren’t directly impacted by banking turmoil in Switzerland and the US. Still, the pace of the withdrawal of funds from banks in the digital age worried regulators and prompted them to review their preparations.
The Council of Financial Regulators has four members: the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, the Australian Treasury and the Reserve Bank of Australia. RBA Governor Philip Lowe chairs the council.
On domestic lending, the council backed a 3% serviceability buffer that banks need to apply on top of the existing mortgage rate to assess borrowers’ capacity to meet their repayments.
Australia’s cash rate currently stands at 4.1% and mortgage rates are running at around 6%, implying a borrower faces a 9% serviceability threshold to be approved for a loan.
“The council noted that the APRA would continue to assess the appropriateness of macroprudential policy settings as economic and financial conditions evolve.”
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