As the decision in the Greek Parliament approaches, a senior official at the RBA says there are few parallels between Lehman Brother’s collapse in September 2008 and Greece, should it default.
The head of the RBA’s financial markets group, Assistant Governor Guy Debelle told a Sydney banking conference yesterday that a Greek debt default wouldn’t have the same financial ramifications as the Lehman failure.
"The linkages of Greece, at least financially, to the rest of the world, there are not that many of them and they are fairly well known," Mr Debelle commented in a panel discussion after a speech.
He pointed out that the Lehman collapse had taken investors by surprise, while a default for Greece has become a reasonable expectation as a possibility.
He also said that Australian banks seem to be coping with the stress around the Greek financial situation.
"At this stage at least, there is no sign of any of those stresses materialising," said Mr Debelle said in answer to another question at yesterday’s panel discussion in Sydney.
He pointed out that Australian banks had issued a fair bit of debt in the last few weeks, while the price of that issuance hasn’t moved "at all".
Should there be a "liquidity event", such as is possible from the debt crisis in Greece, Mr Debelle said banks in Australia have enough collateral in the local market to deal with any follow-on liquidity crunch.
Earlier in his speech, Mr Debelle said Australian banks had been raising less money off shore because of the continuing sharp rise in deposit growth, currently running around 15% a year.
Because of the high level of savings in Australia (11.5% in the March quarter) this strong growth in deposits will continue for some while, meaning Australian banks won’t have to raise as much money in offshore wholesale markets as they did a few years ago.
"There has been strong growth in deposit growth from households as well as businesses," Mr Debelle said.
"The former reflects the increased saving rate of the household sector, much of which has flowed to the banking sector.
"The latter partly reflects the strong growth in corporate profits, particularly in the resources sector.
"While growth in business deposits has been considerably faster over the past 12 months, household deposit growth has still been a very robust 9 per cent."
And he added, "In net terms, the banks have been repaying their foreign liabilities", meaning that offshore wholesale funds have a falling share of total bank funding in Australia. (See the above graph).
According to AAP, NAB CEO Cameron Clyne also talked about Greece at a business function in Melbourne yesterday.
He said the jury was out over whether the crisis could lead to a full-blown financial crisis.
“The question is whether this is a ‘business as usual’ crisis or a ‘real crisis’,” Mr Clyne said.
“We’ve obviously been through a very tumultuous time with the GFC, subsequent to that there have been blips along the way as we’ve dealt with various issues,” he said. “It’s difficult to determine if this is one of them.”
Financial markets are nonetheless very nervous about the situation in Greece and remain convinced that should the parliament not agree to the 28 billion euro austerity package later today or in another vote on Thursday, all hell would break lose.
But markets in Asia don’t seem to be as nervous, nor does the euro which has remained fairly solid against the US dollar.
Of course currencies would become far more volatile should Greece not vote for the package and sharemarkets would no doubt sell off for a while because of the uncertainty.
Perhaps the real fallout might not be felt in financial markets but in the wider economies of Europe and the US where consumer sentiment is mixed to very fragile.
