Aussie banks warned to cut back on lending

Banks in Australia are being told to rein in their lending or face having their credit rating downgraded, it has emerged.

After months of responding to the rush of buyers looking to bag themselves a low-rate home loan, banks are being warned that they need to stop giving money out and starting raking it in.

This could come in the form of attracting new customers to its bank term deposits and savings accounts.

The Sydney Morning Herald reports that if they fail to do so, they could lose their AA credit rating, as Canada did recently – a circumstance that would ultimately hurt the consumer as it would cost the banks more to lend.

Responding to the warning, Citi was quick to point out that Aussie banks are in a fairly steady position.

"Relative to other advanced markets, the Australian banks still stand out as among the most reliant on wholesale funding," the group told clients.

As banks do battle to attract term deposit customers,’s Paul Clitheroe has insisted that it is more important to compare term deposits before signing up.

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