RBA’s Debelle expresses concern over bank funding pressures

Reserve Bank of Australia assistant governor Guy Debelle outlines differences in bank funding pressures in Europe and Australia
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Guy Debelle, an assistant governor at the Reserve Bank of Australia, on Wednesday said Australian banks' funding structures were considerably more resilient to bank funding stresses than banks in Europe.

At the 24th Annual Finance & Treasury Association Congress in Sydney, Australia, Debelle said: "As the concerns about the fiscal sustainability of the euro area have intensified in recent months, and have spread to the financial system, there has been increased pressure on bank funding. The cost of funding for European banks generally has risen, while many banks in the European ‘periphery' countries have all but been locked out of funding markets."

Debelle said in Australia, by contrast, where lending spread between the bank bill rate and the expected cash rate has narrowed, bank funding costs have remained markedly lower than those in Europe. European banks have also experienced a substantial increase in the cost of borrowing US dollars to fund their US dollar assets, he said. Debelle said with many US dollar assets held by European banks of long maturity, and their associated funding positions of much shorter maturities, many of the banks faced significant rollover risks, both in terms of price and availability, on this US dollar funding.

Click here to read the speech.

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