Banks may need to raise capital to maintain corporate lending and financiers and financial markets need to overcome the present "fear", National Australia Bank chief executive, John Stewart, said in a speech to the Australia-Israel Chamber of Commerce in Sydney yesterday.
In reports published by the
Sydney Morning Herald and
The Australian, Stewart said it was important to assure companies and investors that financing was not drying up.
Sources of funds were still available at the right price, Stewart said. This may require banks to raise capital though.
"For the banking sector, if more and more comes on to the balance sheet of banks and they can't raise more capital, then there will be a credit crunch," he said.
"We've got to get away from this fear (of capital) that's gripping the market. What I think banks should be raising capital for is ... corporate Australia.
"So when the other markets close, the banks can keep lending and they can lend profitably."
NAB is in the process of raising NZ$350 million in hybrid capital through Bank of New Zealand.
Stewart raised concerns over any decline in Australia's terms of trade as a longer term issue.
"A lot of the small to medium enterprises living off the resource boom (would be) doing less business and we will then wake up one morning to find corporate Australia, together with consumer Australia, mortgaged up to the eyeballs. I don't see it happening any time soon but it would be nice if it didn't happen at all," he said.