Whiff of Panic among Australia’s Biggest Banks?…“Australia’s WTF Moment”

Friday, August 5, 2016
By Paul Martin

by Wolf Richter
August 4, 2016

Australian bank regulators that had for years practically encouraged the big four Australian banks to do whatever it takes to further inflate the housing bubble suddenly fretted publicly in April about the banks’ exposure not only to housing but also to China. And now something strange has happened that set off all kinds of warning sirens.

On August 2, the Reserve Bank of Australia (RBA) lowered its target “cash rate” by 25 basis points to 1.50%. And what did the banks do? Something so strange it smelled of panic.

Everything is nearly hunky-dory around the globe and in Australia, the RBA said to rationalize the rate cut, but it mentioned some squiggles in Australia’s housing market. And since about two-thirds of the assets of the big four banks are loans to the property sector, particularly mortgages, the RBA is getting nervous. It mentioned the oncoming tsunami of supply of housing units, tightening lending standards, and the pull-back of maxed-out potential homebuyers. It seems the RBA fears that something is going to prick the Australian housing bubble and take down the banks.

The big four banks – Commonwealth Bank of Australia (CBA), Australia & New Zealand Banking Group (ANZ), Westpac Banking Corp (WBC), and National Australia Bank (NAB) – are a special breed. Their total assets amount to 220% of Australia’s GDP!

The Rest…HERE

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