RBA’s FSR: Australian banks are well capitalized, profitable and highly liquid

Reserve Bank of Australia (RBA) published its semi-annual Financial Stability Review (FSR) on Thursday, stating that “Australian banks are well capitalized, profitable and highly liquid.”

Key takeaways

“Australia not immune to global financial shocks.”

“But Australian banks well capitalized, profitable and highly liquid.”

“APRA has stepped up oversight of domestic institutions, considering lessons for regulations.”

“Global financial stability risks have increased, likely to see a tightening of credit.”

“Regulators will need to tighten rules, protect from "digital" runs on banks.”

“Financial system also at risk if inflation stays high, central banks keep tightening.”

“Most Australian households, firms well placed to weather higher rates, inflation.”

“But some are already in stress and squeeze on budgets likely to last for some time.”

“Stress is seen in domestic construction sector, commercial lending.”

“Domestic banks well placed to absorb any increase in non-performing loans.”

“Lenders provisioning for loan arrears to rise, though from very low levels.

“Mortgages in negative equity make up only 1% of total loans.”

“Keeping watching brief on cyber attacks, climate change, geopolitical stress.”