Signs of stress in funding markets and fears a wave of defaults triggered by the coronavirus outbreak are hitting sentiment towards the big banks, as global equity markets reeled following a collapse in the oil price.
While share prices across the board were smashed, there is a fear the banks are exposed to virus fallout on several fronts, including weaker revenue, higher bad debt costs and pressure on interest margins.There are also signs of stress in some of the markets that influence bank funding costs, as investors grow more worried about taking on credit risk at a time of global turmoil.
Mr Plank said it was not surprising this spread had widened given the extreme volatility of the last week, but the RBA would likely be watching the issue."We've seen some signs of stress in the last week, as spreads widen. The gap between the cash rate and where banks fund themselves has widened, and that's a bit of an issue," Mr Plank said.
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