News: Australia's banking regulator is considering forcing the country's largest lenders to make their capital buffers more robust with an aim to prevent a financial crisis that has battered other markets over the past few years, Dow Jones Newswires reports. The Prudential Regulation Authority said that it intended to at least implement capital and liquidity floors demanded by Basel III, adding that any new rules would take effect by the start of 2016.
BMI View: While monetary easing has seen funding costs edge lower, there are growing signs of trouble facing debt-reliant businesses and households, with loan losses likely to rise over the coming quarters. Indeed, the Australian central bank has highlighted the vulnerability of companies providing services related to the mining industry, and residential mortgages-backed securities (RMBS) have seen a persistent rise in arrears of late. We maintain our downbeat profit outlook for the banking sector and highlight the growing risk to the fiscal accounts as authorities provide safety nets rather than implementing reforms to make the financial system more resilient.