Kiwis possible victims in Aussie downgrade

National Australia Bank which owns BNZ has warned it may lower their AA1 long-term, senior unsecured debt ratings because of volatile markets. Photo / Supplied

Ratings agency Moody's warning that it may downgrade the credit ratings of Australia's four major banks could potentially increase longer term interest rates in this country, a banking expert says.

Moody's gave Commonwealth Bank, National Australia Bank, ANZ and Westpac a warning that it may lower their AA1 long-term, senior unsecured debt ratings because they rely on 43 per cent of their funding from markets that are considered volatile.

National Australia Bank owns New Zealand's BNZ and Commonwealth Bank owns ASB.

"The potential impact is that we'll face an increase in longer term interest rates because the banks won't be able to raise their funding in wholesale markets as cheaply as they currently do," said David Tripe, of Massey University's Centre for Banking Studies.

An ASB spokeswoman said New Zealand's banks were less reliant on overseas wholesale markets than Australian ones. "ASB remains a strong and well capitalised bank, with current credit ratings of AA2 from Standard and Poor's and AA from Moody's," she said. "As a result of the proposed review and any possible subsequent adjustment of the bank's rating, we do not expect any change in our ability to access wholesale markets for funding, or any deterioration in the price we pay for wholesale funding."

BNZ said it "remained focused on ensuring that we are well placed to continue supporting customers and investing in our community".

ANZ Group Treasurer Rick Moscati said he understood the rationale for the review and the bank had been working hard to reduce its reliance on wholesale funding, which accounted for around one-third of its funding mix.

"We have also increased the average tenor of our wholesale funding and short- dated offshore wholesale debt now accounts for less than 2 per cent of our Australian funding requirements," said Moscati.

A Westpac New Zealand spokesman said Moody's had indicated that the bank would remain AA rated.

Commonwealth Bank of Australia chief financial officer David Craig described Moody's review as a "storm in a teacup".

Royal Bank of Scotland credit analyst John Manning said Moody's concerns appeared to be about a year late as Australian banks had recently lowered their reliance on wholesale funding markets through increased deposits.

Patrick Winsbury, a senior vice-president at Moody's in Sydney, said the ratings agency took a "multi-year" view of the banks, which have benefited from government guarantees and liquidity support from the central bank.

"We've been banging the drum about it for eight years," Winsbury said.

"We've had a period of extraordinary support from bank supervisors and the government, and you're seeing a global trend in crisis-hit markets to ensure that regulators never do that again."