The great flaw in Australia’s economic model has Moody’s exercised today:
Data from the Australian Prudential Regulation Authority (APRA) highlights the trend that bank loans in Australia started to rise faster than deposits during 1H2014. As a result, banks could be pressured to increase their use of wholesale funding, a development which we would view as a key credit sensitivity for the Australian banking system.
That said, any increased exposure to the wholesale funding markets is likely to be partly offset by higher holdings of liquid assets and improvements to maturity structures, supported by the implementation of first the new Liquidity Coverage Ratio (LCR) requirement in 2015 and second of the Net Stable Funding Requirement in 2019.