Banks in Australia will not be able to increase the proportion of their funding from foreign wholesale sources if they are to satisfy the demands of credit ratings agencies and regulators, NAB's finance director Mark Joiner indicated yesterday.
"I regard us as at a peak in wholesale borrowing, not even in percentage terms but in dollar terms," Joiner said at a Committee for Economic Development of Australia lunch in Melbourne.
"Australian banks will only be able to grow in line with what they are able to bring in on the customer side (with deposits).
"So they will not be able to go with an upswing in credit."
''In my view, the Australian banks, for a long time, will only be able to buy the asset side of their balance sheet dollar for dollar with what they bring in on the customer side,'' he said.
Joiner said that if banks were to borrow more offshore to cater to a rise in lending demand ''the regulators will start to get more assertive'' while ratings agencies may consider downgrading them.
''We already have one shot across the bows from the ratings agencies and we've been downgraded from AA to AA-,'' Joiner said.
''It's very clear that Basel III is going to drive us to a more retail [deposits] mix. At the moment I see a pendulum swing towards regulation and I don't see a lot of informed debate as to whether this is the right response and how far is far enough.''
The Age and
The Australian reported on Joiner's talk to CEDA.