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US, Europe banking fiascos have little effect on Australian banks: analyst

They have different business models from banks in US and Europe.

Australian banks are unlikely to go down the same route as Silicon Valley Bank nor Credit Suisse, according to a report by S&P Global Ratings.

Australian banks should also be able to ride out the short-term disruption in the financial markets triggered by the recent events, the ratings agency noted.

"Australian banks have different business models to these banks," said Sharad Jain, a credit analyst at S&P Global Ratings. "They are mainly focused on conventional banking and operate with sound funding and liquidity under prudential regulations. That places the industry adequately to weather the current market instability."

ALSO READ: Singapore reaffirms creditor hierarchy following Credit Suisse AT1 wipeout

The recent collapse of the US-based Silicon Valley Bank and downgrade of First Republic Bank highlight the risks from an asset-liability mismatch and unstable deposits, the ratings agency noted. In addition, the write-off of AT1 capital instruments issued by Swiss banking giant Credit Suisse has startled many market participants.

Prolonged dislocation of financial markets, however, would erode the banks' earnings and pose risks to our ratings on smaller institutions, Jain warned.

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