Fears mount over the stability of the Australian banking system.
A sharp increase in the cost of insuring an Australian bank default has taken markets by surprise this week. While Australian banking sector shares have performed well up until now, credit default swap premiums have been climbing since August according to the latest data release from The Reserve Bank of Australia.
CDS premiums for Australian lenders have climbed above those for US, Canadian and German banks but have not yet matched the rise experienced by several French banks earlier this quarter.
It is thought concerns may have originally arisen over Australia’s external funding sources and its exposure to the European sovereign debt crisis.
This does beg the question however, why should we be more concerned over Australia’s exposure to Europe than of the UK’s? Or the US’s ?
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