The Australian financial system remains largely shielded from the international turmoil that has battered others around the world, the Reserve Bank’s financial stability review concluded today.
“While the Australian financial system has not been completely insulated from developments abroad, it is weathering current difficulties much better than many other financial systems,” the central bank said.
According to the review, Australia’s banking system is soundly capitalised with only limited exposure to sub-prime related assets and low levels of problem loans.
“Credit standards in Australia over the past decade were not eased to anywhere near the same extent as in the United States,” the bank said.
A rebuilding of confidence in overseas financial institutions and further steps to strengthen their balance sheets would be crucial to settling international conditions, the RBA said.
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