RBA’s Kearns: Australian banks better prepared for crisis than in 2008

Australian banks are better prepared to deal with an economic downturn than they were prior to the 2008/09 global financial crisis, with much higher holdings of liquid assets, Jonathan Kearns, Head of Financial Stability at the Reserve Bank of Australia (RBA) said on Tuesday in a speech to an online banking event.

“Banks are well capitalised,” he said

The average Tier-1 capital ratio for Australian banks has nearly doubled since 2007 to almost 14% now, Kearns noted

“Importantly they have large buffers which are there to be used, not preserved, and will enable them to continue lending and supporting their customers, and so the economic recovery.”

Australian banks are also profitable, he said.

Meanwhile, Swati Pandey and Richard Pullin explained that in 2019, the combined profits of the banking system totalled A$34 billion ($25.6 billion) while their return on equity, at 11%, exceeded their cost of equity.

”Separately, Australia’s prudential regulator on Tuesday removed limits on dividend payouts by banks, saying the banking system could handle a “very severe” economic downturn.”

”Australia’s A$2 trillion economy has fared better than much of the developed world thanks to its early success in curbing the pandemic. Preliminary data for the December quarter points to strong growth in the period after 3.3% growth in the third quarter.”

AUD/USD probes intraday top near 0.7550 on RBA minutes, focus on China data