S&P Global upgrades non-major Australian banks

It cites strengthened governance and lower industry risks as main reasons for upgrade

S&P Global upgrades non-major Australian banks

S&P Global Ratings has upgraded the ratings of numerous Australian non-major banks and financial institutions.

The credit rating agency also upgraded all the rated Additional Tier 1 and Tier 2 instruments issued by Australian banks and their New Zealand banking subsidiaries.

Despite the upgrades, the issuer credit ratings for several institutions, including the four major Australian banks, Macquarie Bank, and two foreign-owned banks, have remained the same.

Additionally, S&P has placed its long-term and short-term ratings on Suncorp-Metway on CreditWatch, hinting at positive future developments.

Read more: Australian banks face reduced risks in 2024 – S&P Global

The ratings agency cited a reduction in industry risks and a continued enhancement of governance standards across the Australian banking sector as key reasons for these changes. Specifically, the industry risk score for Australia has been revised to 2 from 3, indicating a lower risk level comparable to those of banking systems in Canada, Hong Kong, and Singapore.

“Continued strengthening of regulatory and governance standards in the Australian banking sector has reduced industry-wide risks,” said S&P credit analyst Nico DeLange (pictured) in the report released on Wednesday. “Simplified business models and advances in risk management have also contributed to this improvement.”

One notable aspect of Australia’s banking sector reform, he added, is the introduction of an accountability regime aimed at holding senior executives and directors responsible for their decisions and actions.

“The major Australian banks have divested almost all their wealth management and insurance businesses,” DeLange said. “This should lower the risk of lapses in regulation and conduct because many past issues emerged out of these businesses owned by the major banks.

“Outlooks on all the remaining Australian banks, almost all other Australian financial institutions, and their New Zealand subsidiaries are stable.” 

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