For the most part, Australia has skated through the global financial crisis unscathed, with its banks propped up by a strong resource sector. Until recently, the country has been a sort of antipodean Canada. Now the wonder down-under is showing signs of strain.
Credit-ratings firm Fitch has downgraded Australia’s three major banks, Commonwealth Bank of Australia Ltd., Westpac Banking Corp. and National Australia Bank Ltd. from AA to AA-.
Fitch cited higher funding costs as the main reason for rating cuts.
The latest downgrade has come barely two months after Standard & Poor’s downgraded the same three Australian banks, plus ANZ Banking Group, from AA to AA- as part of changes to the way it assesses risk.
The Macquarie Group, too, had its long-term rating downgraded from A- to BBB.
Australia’s banking sector has been under the scanner of ratings firm for some time; the moves by Fitch and S&P follow similar downgrades by Moody’s Investors Service in May.
Part of the reason for these downgrades is said to be Australian banks’ heavy reliance, on offshore wholesale debt markets from which they get around 40% of their funding. The ongoing eurozone crisis has had a detrimental effect on the cost of such debt.