Ratings agency S&P Global has downgraded almost all financial institutions in Australia because they face an “increased risk of a sharp correction in property prices”.

Twenty-three institutions, including AMP, Bank of Queensland, Bendigo and Adelaide Bank and Credit Union Australia, received downgrades to their stand-alone credit profiles.

Credit ratings downgrades can force up the cost of borrowing for financial institutions which in turn can be passed onto customers.

The ratings agency said Australian financial institutions were particularly susceptible to a housing correction with “residential home loans securing two-thirds of banks’ lending assets” and “the impact of such a scenario on financial institutions would be amplified by the Australian economy’s external weaknesses, in particular its persistent current account deficits and high level of external debt”.

Despite the downgrade and the view that the chance of a sharp correction in house prices has increased, S&P says the “outlook for Australian banks remains relatively benign by global standards”.

Source: ABC News