The capital position of Australian banks has never been a problem, despite the recent turmoil in the international markets, the Reserve Bank of Australia (RBA) has said.
"There was never any doubt about the solvency of any Australian bank," RBA governor Glenn Stevens said in the bank's annual report published yesterday.
The governor said the past year has seen some of the most demanding circumstances for the domestic market operations of central banks for many years.
"The very sound position of the local banks was a major source of strength for the Australian financial system during this period." Stevens said.
"Practices that had been largely settled since the mid 1980s had to be adapted quickly, in the face of very unusual and fast-moving developments."
The bank moved to accept a wider variety of assets as collateral for loans, expanded the term of contracts and pushed up the quantity of settlement funds in the system.
"The intention of this was to maintain liquidity in the domestic financial system, as local and international markets underwent the difficult and potentially disruptive process of re-pricing risk," Stevens said.
