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Regional banks struggle, but will recover: RBA

by Staff Reporter7 minute read

While Australia’s big banks remain resilient, the country’s smaller regional banks are currently under “downward pressure”, according to the Reserve Bank of Australia (RBA).

Yesterday, the RBA released its biannual Financial Stability Review, which found that smaller, lower-rated banks were under increasing pressure because they had to pay higher rates to attract deposits and borrow on wholesale markets.

However, there are positive signs in the market for mortgage backed securities which means the smaller banks might regain grounds.

Earlier this month, ME Bank launched an issue of $500 million of prime residential mortgage-backed securities (RMBS).

The offer, called SMHL Securitisation Fund 2009-2, was the second by ME Bank in two weeks.

In the latest offer, ME Bank called on the Commonwealth Bank of Australia, Macquarie Bank and Deutsche Bank to help it sell the notes.

According to the RBA, this latest issue meant investors were willing to turn to banks without a government guarantee, which will hopefully spell good news for small banks moving forward.

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