Moody's New Target

June 15, 2011

(Please see below for my editorial on this article)

 

Moody’s claimed that their reliance on wholesale funding is the reason for a one-notch demotion.


Since 2007, Moody’s has given Aa1 rating to Commonwealth Bank of Australia (ASX:CBA), Westpac Banking Corporation Ltd (ASX:WBC), ANZ Banking Group (ASX:ANZ) and National Australia Bank Ltd (ASX:NAB). The said banks have maintained such rating for years.

 

Conversely, the agency has now delivered on its caution in February and lowered the long-term, senior unsecured debt ratings of Australia's big four banking institutions to Aa2.

 

Moody's assessment of the Australian banking system's structural sensitivity to conditions in wholesale funding markets is reflected in the rating downgrade.

 

This action takes Moody's ratings in line with those of the other two major ratings organizations – Standard & Poor's and Fitch. In the first quarter of this year, Moody's aimed to focus on the Australian industry's dependence on the global wholesale lending market, in which big banks lend to each other.

 

During times of uncertainty – such as during heightened worries about finances of European Union nations, that market can tighten.

 

According to Commonwealth Bank’s group treasurer Lyn Cobley, the bank, at present, does not expect the rate demotion to have any material bearing on its funding plans or expected pricing of its new debt issuance.

 

Commonwealth Bank accounted a provisional net profit of $3 billion in the six months towards the end of December 2010.

 

Wednesday, May 18, 2011
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My Response:

 

Wow !

 

Moody's is now turning its attention to Australian Banks!

 

Really?

 

I have been in Banking for 39 years, and over those years I came across many situations, issues, lived through major financial crisis , and it seems to me that agency's like all the Moodys of this planet have a knack for lecturing "Others" while there are serious problems at home (In the USA)

 

I am not defending the Australian banks , but if they are to be demoted, then why not the American Banks, and why not the European Banks?

 

Why them and why now? What is going on behind the scene that we don't know?

 

Why is it that institutions like Moody's are constantly looking for new targets… when they have plenty of those right under their noses at home?

 

Perhaps Moody's should read more about what a Zen Master that once said: When you are too close to the tree you cannot see the forest.

 

Gilles Herard, Jr.

http://www.gillesherard.com

 

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