31 Jan 2012

Australian banks warned of possible downgrade

5:28 am on 31 January 2012

The big four Australian banks have been warned they may be downgraded by the Fitch ratings agency because of their reliance on offshore funding.

ANZ, Westpac, Commonwealth and National Australia Bank all face being downgraded one notch.

Westpac, Commonwealth Bank, and the National Bank of Australia are currently rated at AA by Fitch.

ANZ's rating is double A minus, due to that bank's strategy of expanding into Asia.

Senior director at Fitch Ratings, John Myles, says offshore funding accounts for around 30% of the banks' total funding.

Since 2007, he says, reliance on this form of funding has been shown to carry potential risks because of its vulnerability to swings in confidence, leading to the decision to put them on negative watch.

The ABC points out that the warning from Fitch come around two months after another ratings agency, Standard Poor's issued its first downgrading of Australian banks in two decades.