Financial regulators remain confident that Australia’s banking system, including smaller banks, can weather the turmoil in global financial markets.
Australia’s Prudential Regulation Authority stepped up its monitoring regime after the collapse of Silicon Valley Bank and UBS’s takeover of Credit Suisse.
While APRA’s intensive supervision continues, its investigations have so far reinforced its belief that Australian banks, including smaller banks, are well capitalized and have access to sufficient liquidity.
Quick action by regulators and authorities in the US and Europe has so far stabilized markets and improved confidence, although some volatility remains.
Treasurer Jim Chalmers said Australia was not immune to volatility in global financial markets.
“But Australians should be confident that our banks are well regulated, well capitalized and highly liquid and are in a better position than most to deal with these disruptions,” he said.
Dr. Chalmers said that the measures taken by central banks and international financial authorities were working to calm the markets.
“Although we have seen some stress in the global funding markets, our domestic funding markets continue to perform well,” he said.
Rally sizzles as Europe pushes ahead with rate hikes
Europe’s post-Credit Suisse rally has come to a halt, as Switzerland and Norway show that the year-long cycle of steep interest rate hikes is not over.
The Bank of England (BoE) also raised interest rates for the 11th straight time by 25 basis points on Thursday, but said a surprise resurgence in inflation would likely fade quickly, raising speculation that it had finished its series of increases. reported Reuters.
Stock markets were relieved when the Federal Reserve hinted at a pause after its latest quarter-point hike on Wednesday, so seeing Switzerland’s SNB raising rates again despite its torrid week was a reminder not to be let down. carry too much
The European STOXX 600 stock index fell 0.75 percent and banks and insurers were the main culprits again, suffering falls of 1.6 percent to 2.0 percent.
Norway had also risen, although MSCI’s main global stock index was still in positive territory after overnight gains in Asia.
“The measures announced at the weekend…have stopped the crisis,” the SNB had said, referring to Credit Suisse’s forced marriage to UBS, a view also expressed by the powerful head of Germany’s Bundesbank overnight.
The pound added to its nearly 5.0 percent rally in the past fortnight with a 0.3 percent rise to $1.2315 ($1.8296), while yields on UK government bonds The UK, which reflects borrowing costs, were global outliers as they also rose slightly.
The dollar index, which measures the greenback against the world’s six other major currencies, was licking its wounds after hitting a seven-week low after the Fed.
Both the euro and yen were up on the day, as was the Swiss franc after the SNB’s half-point rise.
Elsewhere in bond markets, while UK yields rose, German Bund yields fell 2.281%, content to match declines seen in 10-year US Treasury yields that they had brought them to 3,440%.
Fed Chairman Jerome Powell said on Wednesday that tensions in the banking sector could affect lending and have a significant impact on the US economy, reducing the need for the central bank to raise rates to control inflation.
Germany’s European Central Bank rate setter Joachim Nagel had even said he now thought the ECB was “approaching tight territory” with its rates, meaning a level that reduces growth.
“I don’t know when we will be there more or less… but what I do know is that when we are there we have to stay there and not go down too early,” he said.
Among commodities, US crude fell 1 percent to $70.19 ($104.28) a barrel and Brent to $76.04 ($112.97), down 0.85 percent.
Wall Street futures rose, however, after Fed relief was offset by US Treasury Secretary Janet Yellen, who told lawmakers she had not considered or discussed creating a ” general insurance” for US bank deposits without congressional approval.
Markets are now pricing in about a 65 percent chance that the Fed will pause at its next meeting, in May, and a 35 percent chance of a 25bp hike then, the CME FedWatch tool showed. .