In the wake of Standard & Poor’s downgrading the outlook for Australia’s credit rating to negative, the ratings of the big four banks have also been cut by the ratings group.
The ratings agency revealed its cut to the outlook for the big four banks, Commonwealth Bank, National Australia Bank, ANZ Bank and Westpac.
The big four banks are among a small group of global lenders with AA- rating from S&P, which helps make them among the safest corporate borrowers in the world.
But that rating is raised two notches because S&P assumes they would receive government support in times of financial stress.
Action on the government’s rating therefore flows directly into the banks’ ratings.
"The negative outlooks on these banks reflect our view that the ratings benefit from government support and that we would expect to downgrade these entities if we lower the long-term local currency sovereign credit rating on Australia," Standard & Poor’s said.
S&P is leaving the door open for the government to regain its "stable" outlook, which would in turn be passed on to the banks.
"We could revise the outlook on these entities back to stable if we revise the outlook on Australia’s ‘AAA’ local currency sovereign credit rating back to stable," S&P said.
