Australian Banks: Should We Be Worried?

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By Rudi Filapek-Vandyck

Should investors become worried about competition forcing banks into taking on more risks in order to keep the momentum going and their market share intact?

The theme has even caught the attention of the Federal government in Canberra with recent media reports informing us Treasurer Peter Costello felt compelled last week to address the issue directly with the banks.

Before Costello’s initiative, Morgan Stanley economist Gerard Minack already touched upon the matter in one of his recent assessments of the Australian economy. As you would expect from Australia’s own super bear, the initial judgment is that concerns are very real and justified.

"If the banks haven’t already written loans that will blow up in their faces, they’re doing it as we speak", Minack wrote last week, leading him to the conclusion that "at some stage" Australian banks will turn into "a big sell".

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