• Banks;
  • Risk;
  • Capita

This paper identifies major strengths and weaknesses of the Australian Banking Sector with a focus on risk characteristics. It notes that: the major banks are among the most profitable globally; robust industry regulation is supported by transparent accounting policies and practices; and adequate capitalization is supported by good-quality residential mortgages which form a high proportion of the major banks' balance sheets. Weaknesses include: intense competition, in both the loans and deposits segments, resulting in compressed net interest margins; and the risk of a modest rise in non-performing assets due to softening of economic conditions, particularly as household debt remains high and continues to rise.