Banks face ratings downgrade
By
Andrea Lavigne
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25/11/2009 12:00:00 AM
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Australia's big banks risk a ratings downgrade unless they boost their balance sheets over the next 18 months.
Standard & Poor's raised the minimum that banks will need to cover their lending exposures to 8% - a move that catches many of the world's big banks short.
According to the SMH, Australian banks have raised more than $20 bn in new capital over the last year to bolster their balance sheets.
Under Standard & Poor's old measure for bank capital, they were among the strongest in the world in the tier 1 ratio. But the old rules included both higher-risk and lower risk forms of lending from tier 1 banks.
The new rules distinguish between the two – giving a lower rating to hybrid capital. About a quarter of Australian banks total capital is hybrid securities.
Forty-five banks around the world were reviewed under S&P's new measure and very few were determined to meet the new requirements. The top rated global bank is HSBC, followed by Dexia and ING.
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