Australian Bank Funding and Capital Improvements to Slow, says Fitch

Australian bank funding and liquidity improvements are likely to continue, albeit at a reduced pace, according to Fitch Ratings.

However, the credit ratings agency (CRA) adds that a sharp increase in demand for credit may pressure the ability of banks to fund the growth without potentially reversing some of the recent gains.

Fitch notes that Australian banks have largely addressed the capital and liquidity coverage ratio requirements of the Basel III capital adequacy regime, following significant strengthening post-2008.

An increase in deposit gathering and lengthening of wholesale funding duration drove stable funding (customer deposits plus long-term wholesale funding) to 75% of total funding at end-March 2014, up from 62% in 2008.

Further funding improvements are likely to be more nuanced, with a greater emphasis on longer-term funding rather than deposits, while any additional capital requirements are likely to be achieved through retained earnings.

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