UK Bank Bailout Shows Need For High Interest Rates
Tuesday, 20 January, 2009
Analysts say the latest bank bailout package in the UK highlights the pressure that remains on Australian banks to keep their interest rates high.
After injecting capital into its banking system last year, the UK Government is offering banks more measures, including insurance to protect them
againstbad credit loans.
Wilson HTM banking analyst Brett le Mesurier says the move underscores the deep uncertainty about the size of banks' bad debts.
Mr. le Mesurier says Australian banks will continue to struggle to fund their loans, even though they are in a much better situation.
"Not withstanding the fact that their bad debts have been increasing, they have nowhere near the issues that the UK banks have," he said.
"But of course it does mean generally greater uncertainty in the global banking industry and you're likely to see that uncertainty translate through to higher cost of credit for the banks and they'll pass that on to customers."
Source: http://www.abc.net.au/