19 May 2011

Ratings agency downgrades Australian banks

4:47 am on 19 May 2011

Moody's has downgraded the credit ratings of the big four Australian banks and says ratings of New Zealand subsidiaries remain under review.

A banking partner at PricewaterhouseCoopers says the downgrade means a similar fate for New Zealand banks is likely.

Paul Skillender says Moody's rationale for the downgrade - high reliance on overseas funding - also applies to New Zealand's banks which get close to 40% of their money from offshore lenders.

A downgrade would force up New Zealand banks' borrowing costs overseas which could mean higher mortgage rates, he says.

Moody's says a decision on the New Zealand banks' rating will be released next week.