Silicon Valley Bank collapse: Australian banks are safe after SVB ...

“Australians should be reassured that we have a resilient, well-capitalised banking system that has strong liquidity coverage,” Dr Chalmers said.

The failure of SVB and concerns about the fate of other US regional banks have caused investors to pare back expectations for future rate increases, with markets on Wednesday fully pricing for the cash rate to stay on hold at 3.6 per cent when the RBA next meets on April 4.

The CFR said it will continue to monitor credit growth, asset price developments and the broader resilience of the financial system as households and firms grapple with the fastest RBA tightening cycle in a generation.

“APRA’s ‘unquestionably strong’ capital requirements, combined with liquidity coverage ratio and net stable funding ratio requirements to reinforce liquidity and funding resilience, mean the Australian banking system is well-positioned to adjust to evolving economic conditions and other external shocks,” the regulators said.

The liquidity coverage ratio requires banks to hold a minimum level of assets that can be quickly converted into cash, while the net stable funding ratio assumes longer-term funding – which costs the banks more – is more stable than short-term funding.

Longer-term funding includes three- or five-year bonds; short-term debt has tenure of less than a year.

The CFR also said it was monitoring how lenders were supporting borrowers experiencing hardship as interest rates rise, and flagged an increase in non-performing loans over the period ahead.

“The council recognised that there is significant variation in experience across borrowers, with a small share of households with high levels of debt relative to their income and low savings and equity buffers experiencing debt-servicing challenges.”

The regulators said lending standards had remained prudent, while high levels of savings and Australia’s historically tight labour market were helping households to withstand higher rates and cost-of-living pressures.

Economists at Jarden expect households to draw down more than $120 billion in savings over the next two years as they grapple with rising repayments and falling real incomes.