Research Team: Dr Simon Cottrell (CMVI), Assoc Prof Sigitas Karpavicius (The University of Adelaide)
Issue
Australia has a unique banking sector that relies heavily on international funding leading to potential mortgage rate rises beyond those recommended by the RBA.
Aim
To investigate whether domestic and foreign monetary policy impacts the costs of wholesale funding using debt funding issuance data by the four largest Australian banks.
Outcomes
Using wholesale funding data across five major currencies, this research showed that the cost of a large portion of wholesale funding of Australian banks do not depend on the RBA policy rate but rather are impacted by the decisions of foreign monetary authorities. The results are of high importance to regulators and policy makers.
