Ozzie banks borrow nearly all their financing from overseas. That's great so long as everything goes well but if the property market tanks, the reverse flow of money will crunch the dollar causing costs to the banks to balloon. Now people will say, "Oh, but the banks have their O/S currency loans hedged". I'm not so sure and even if they do, to take advantage of the hedging they'll have to unwind them to offset the currency loss. That will spiral the dollar down further.
Here's a video demonstrating what will happen once it starts to go...
Ozzie banks borrow nearly all their financing from overseas. That's great so long as everything goes well but if the property market tanks, the reverse flow of money will crunch the dollar causing costs to the banks to balloon. Now people will say, "Oh, but the banks have their O/S currency loans hedged". I'm not so sure and even if they do, to take advantage of the hedging they'll have to unwind them to offset the currency loss. That will spiral the dollar down further.
Here's a video demonstrating what will happen once it starts to go...
It's impressive that you managed to write so many incorrect statements 4 lines of text.
"The Achilles heel of Australia's banks has, and is likely to remain, a reliance on offshore wholesale funding.
For two decades the demand of households and businesses for credit has outstripped the pace of savings leading the nation's lenders to plug the gap with financing sourced from long term bond market and short term money markets."
"The Achilles heel of Australia's banks has, and is likely to remain, a reliance on offshore wholesale funding.
For two decades the demand of households and businesses for credit has outstripped the pace of savings leading the nation's lenders to plug the gap with financing sourced from long term bond market and short term money markets."
The beauty of it is that rather than offer higher interest rates on local deposits they sell bonds to foreign entities. Thus, even though the interest costs are lower on the bonds, the interest payments end up sapping money out of the country, thus feeding the drivers that cause them to sell bonds.
A virtuous cycle...
Then again, if the money went to term deposit holders, they'd end up just frittering it away on overseas holidays or imports anyway. Seems like Money just doesn't like being trapped in Australia. Everyone is angling on a way to get it out and we end up having to borrow from overseas, or sell our assets to foreign investors, who then demand handsome dividend payments.
"The Achilles heel of Australia's banks has, and is likely to remain, a reliance on offshore wholesale funding.
For two decades the demand of households and businesses for credit has outstripped the pace of savings leading the nation's lenders to plug the gap with financing sourced from long term bond market and short term money markets."
Ozzie banks borrow nearly all their financing from overseas
Nope, only about 20%.
Did you read that on Macrobusiness? It sounds like the sort of misinformation they spread. But don't feel too bad, you're not the first bear to get sucked in by this one.
"The Achilles heel of Australia's banks has, and is likely to remain, a reliance on offshore wholesale funding.
For two decades the demand of households and businesses for credit has outstripped the pace of savings leading the nation's lenders to plug the gap with financing sourced from long term bond market and short term money markets."
That makes absolutely no sense. Australian banks borrow long term from overseas markets, but they don't need to do that to fund their lending. We've had this discussion many times here, perhaps you missed it, but no one overseas has Aussie dollars to lend us, they can only lend us their currency, which is then swapped for $AUD which is already here.
If overseas markets froze it wouldn't stop our banks from lending, they would just have to source their funding here.
Take risks - if you win you will become wealthy, if you lose you will become wise
That makes absolutely no sense. Australian banks borrow long term from overseas markets, but they don't need to do that to fund their lending. We've had this discussion many times here, perhaps you missed it, but no one overseas has Aussie dollars to lend us, they can only lend us their currency, which is then swapped for $AUD which is already here.
If overseas markets froze it wouldn't stop our banks from lending, they would just have to source their funding here.
They do need the funding from overseas, that is why they seek it.
Yes, they don't have AUD but they bring their USD, YEN and Euro's et all and buy our Aussie dollars which raises the value of our AUD. When they sell out of the AUD to buy back their currency our dollar falls in value. If/when that happens en masse our dollar will fall a lot in value.
We would suffer a credit freeze if our banks were frozen out of foreign markets, there is not enough willingness/supply of local funds to support them, that is why they go seek overseas funding.
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
They do need the funding from overseas, that is why they seek it.
Yes, they don't have AUD but they bring their USD, YEN and Euro's et all and buy our Aussie dollars which raises the value of our AUD. When they sell out of the AUD to buy back their currency our dollar falls in value. If/when that happens en masse our dollar will fall a lot in value.
We would suffer a credit freeze if our banks were frozen out of foreign markets, there is not enough willingness/supply of local funds to support them, that is why they go seek overseas funding.
Sorry Poon but that's just wrong.
Take risks - if you win you will become wealthy, if you lose you will become wise
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