Big 4 banks' credit rating downgraded
- Thread starter Bon
- Start date
Don't expect the next interest rate cuts to be fully passed on. A change in credit rating increases the cost of funds for lenders, which in turn effects the how much they charge the borrower.
I don't think we will see an interest rate cut in December, this article by Chris Joyce also provides a great reasoning as to why the RBA won't simply cut rates for the banks.
http://www.businessspectator.com.au...economy-pd20111201-P4T54?OpenDocument&src=kgb
Their offshore funding doesn't mature until 2012 anyway, so a December rate would be bit pre-emptive just for the sake of the banks.
http://www.businessspectator.com.au...economy-pd20111201-P4T54?OpenDocument&src=kgb
Their offshore funding doesn't mature until 2012 anyway, so a December rate would be bit pre-emptive just for the sake of the banks.
True though, as I've been saying, funding issues have been building for some time so the prospects of anything like a full "pass on" are minimal with or without the downgrade (which was expected).
I got $2.40 for interest rates to stay the same last night. Pretty good bet I would say, 140%.
So you dont believe the RBA will lower rates to prevent the banks from having to raise them just as Julia is experiencing some positive momentum?
Interesting.
Interesting.
The RBA are independent of the Government. With new laws coming in allowing lenders to switch next year for free, I don't think the banks are game to risk upsetting customers by raising rates without an interest rate increase. That is a sure fire way to see people moving to credit unions.
The banks also have no reason to raise rates, at least not yet. Their profitability might get hurt, but welcome to the real world of business where your profit margins are squeezed by higher costs and competition outside of a cartel.
The article by Joyce also explains how the RBA act as a liquidity buffer for the big 4 banks. It just goes to show how the banks' credit rating isn't really all it's cracked up to be... If the RBA bail out banks with liqudity problems, why not other public listed companies and small-medium businesses?
The banks will come undone one day, I'm waiting for the right moment to short them... a recession here, or high interest rates is enough to pop the property bubble and hurt the banks. They are in way too deep with no buffer.
The banks also have no reason to raise rates, at least not yet. Their profitability might get hurt, but welcome to the real world of business where your profit margins are squeezed by higher costs and competition outside of a cartel.
The article by Joyce also explains how the RBA act as a liquidity buffer for the big 4 banks. It just goes to show how the banks' credit rating isn't really all it's cracked up to be... If the RBA bail out banks with liqudity problems, why not other public listed companies and small-medium businesses?
The banks will come undone one day, I'm waiting for the right moment to short them... a recession here, or high interest rates is enough to pop the property bubble and hurt the banks. They are in way too deep with no buffer.
Interesting, was just going over a FT article from a month back how the big 4 were 50 % of the worlds AA rated banks due to the conservative attitude.
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Hey Rolf, I don't think there is anything conservative about home loans making up 140% of GDP... especially when combined with Government, personal and credit card card debts that makes up 292% of GDP.
Right now as a nation, we are stretched to the limit and there is very little room for credit growth... we have to enter a period of deleveraging sooner or later (if we want to keep our financial health in place it is imperative IMO, otherwise we will end up in a right mess like Europe and America), along with the rest of the worlds' debt-ridden economies... so far they have been printing money and kicking the can down the road, but that only works for so long. America and Europe will enter a recession in the next few years and I don't think the resource sector will be enough to sustain our economy alone. If we enter a recession and unemployment goes circa 10%, watch out for the property bubble bursting.
Gold and silver will be great investments and outperform any other asset class except for possibly agriculture. You have to give props to hobo-jo, he is one of the sharpest posters on this forum I believe and has been riding the rising price of gold & silver for quite some time.
All my opinion, of course.
Right now as a nation, we are stretched to the limit and there is very little room for credit growth... we have to enter a period of deleveraging sooner or later (if we want to keep our financial health in place it is imperative IMO, otherwise we will end up in a right mess like Europe and America), along with the rest of the worlds' debt-ridden economies... so far they have been printing money and kicking the can down the road, but that only works for so long. America and Europe will enter a recession in the next few years and I don't think the resource sector will be enough to sustain our economy alone. If we enter a recession and unemployment goes circa 10%, watch out for the property bubble bursting.
Gold and silver will be great investments and outperform any other asset class except for possibly agriculture. You have to give props to hobo-jo, he is one of the sharpest posters on this forum I believe and has been riding the rising price of gold & silver for quite some time.
All my opinion, of course.
