ABC’s The Business ran a good segment last night on the S&P ratings downgrade of the 23 smaller banks on the back of the Sydney and Melbourne housing bubbles, and the “uncomfortable” rise in household debt.
The segment features a smaller lender, the Bank of Queensland (BoQ), who is furious that they have been downgraded when their balance sheets are in good condition, they have high capital levels, and they have minimal exposure to Sydney and Melbourne, whereas the four major banks (and bubble blowers) have been left untouched.
Accordingly, the smaller banks funding costs are set to rise, placing them at an even bigger funding disadvantage to the implicitly guaranteed majors.
The segment notes that the Coalition’s 0.06% levy on the major banks’ liabilities will help to alleviate some of the policy disadvantage faced by the smaller players, by returning some market power to the smaller players and boosting competition. That said, the BoQ also wants APRA to raise the major banks’ capital to ensure “they are unquestionably strong”.
