A European stress test for Australia's banks

APRA's chairman John Laker has provided tentative reassurance that Australia's banks are safe and could withstand a freeze in global funding markets, but if the eurozone can't be stabilised they'll face a stern test.

So, Australian Prudential Regulation Authority chairman John Laker believes Australian banks could survive ‘’a period of months’’ without access to global markets if global funding markets freeze as a result of the turmoil in Europe. That’s not exactly reassuring.

In fact the major banks themselves believe they are holding sufficient liquidity, have termed out their wholesale borrowings sufficiently and have displaced sufficient wholesale debt with customer deposits to survive quite a lot longer than that.

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