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Funding costs remain the biggest threat to bank profitability in 2011, ANZ chief executive Mike Smith has said.
Speaking to CNBC in Hong Kong, Mr Smith said as funding costs increase, margins will tighten causing profitability to suffer.
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He said all four majors will need to use capital in a far more effective manner moving forward.
The ANZ chief said funding costs, not the Treasurer’s proposed banking reforms, would be the biggest issue the banks faced in the New Year.
Late last year Treasure Wayne Swan put forward a set of banking reforms that were designed to re-introduce competition to the market.
Under the proposed reforms, the government would look to ban mortgage exit fees, introduce mandatory checklists for home loans and give the competition regulator powers over price signalling.
But Mr Smith said these changes would not fundamentally alter the structure of the industry. In fact, he said, some of the government’s initiatives would actually help to create further funding opportunities.
