News Round Up

Big four banks OK: S&P; Gilt Edge rating affirmed; Anti-Money Laundering bill released; RBNZ confident in financial system, helps lift liquidity.

Monday, September 22nd 2008, 6:43AM

The big four Australian banks are in good shape to withstand the current economic situation.

Standard & Poor’s has reviewed the banks and affirmed their credit ratings. "Barring a more dramatic worsening of global financial investors’ confidence and any unforeseen impact arising from past risk-management issues, we expect the ratings on the four majors to remain in the AA category," Standard & Poor's credit analyst Sharad Jain said. “Globally, few commercial banks are rated as high as these banks.”

Jain said the banks “enjoy a fortuitous combination of operating circumstances, partly due to their conservative stance, which support their credit profiles. They have limited exposures to US subprime loans and associated complex structured transactions, and to major offshore financial institutions affected by the loss of global investor confidence.” Also Australia's domestic low-documentation mortgage loan market (such loans being somewhat akin to subprime) is not sizable.

Gilt Edge rating affirmed

While Macquarie Group saw its share price fall last week Standard & Poor’s affirmed its cash and bond fund credit ratings on 12 of Macquarie’s cash and bond funds.

The funds are managed by Macquarie Investment Management. The main one used in New Zealand is the Macquarie Gilt Edge Access Account which has its rating affirmed at AAm.

Anti-Money Laundering bill released
The government has released for consultation a draft of its Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Bill.

"Cabinet has approved the fundamental policy underpinning New Zealand's anti-money laundering reforms and now we need the private sector to take a look at the proposals and give us their feedback and comments,” associated minister Clayton Cosgrove says.

"It is very important that New Zealand continues to contribute to the global fight against money laundering and terrorism financing, but we must be mindful of the potential impact such reforms may have on New Zealand's financial sector," Cosgrove says.

Financial institutions and casinos will be the first group of businesses covered by the new requirements. Other businesses, including lawyers, accountants, and real estate agents, will be not be covered until the second stage.

RBNZ confident in financial system, helps lift liquidity
The Reserve Bank says it has confidence in the nation's financial system in the wake of global market turmoil, though it will take steps to help lift liquidity among banks.

"Financial prices have become volatile and, with heightened uncertainty, investors are becoming more risk averse," Governor Alan Bollard said. New Zealand banks aren't directly involved though there are "indirect adverse effects on liquidity," he said. [Read On]

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