* Moody's rating now in line with S&P and Fitch
* No impact on funding costs expected: analyst
* Bank tax passes both houses of parliament
By Jamie Freed
SYDNEY, June 20 A credit ratings downgrade of
Australia's biggest banks by Moody's Investor Service is not
expected to raise their funding costs because the new rating is
in line with other ratings agencies, Deutsche Bank analysts
Moody's on Monday downgraded the four largest Australian
banks to a long-term credit rating of Aa3 from Aa2, citing risks
from high household debt levels after sharp property price
The new rating is in line with the long-term AA- credit
rating that Commonwealth Bank of Australia, Westpac
Banking Corp, Australia and New Zealand Banking Group
Ltd and National Australia Bank Ltd (NAB) have from
Standard & Poor's and Fitch Ratings.
"Given this downgrade merely brings the major banks' credit
ratings under Moody's to the equivalent notches under S&P and
Fitch, we expect no impact on funding costs," Deutsche Bank
analysts said in a note to clients published on Monday.
However, the analysts said there was still a risk that S&P
would downgrade the major banks due to a sovereign ratings
downgrade or a reduction in government support, which could lift
long-term funding costs by 10 basis points. S&P revised its
outlook on the major banks to negative last July.
Both houses of Australian parliament on Monday voted in
favour of a 6 basis point levy on certain liabilities of the
four biggest banks and Macquarie Group Ltd in a measure
meant to help return the federal budget to a surplus by 2021.
The banks have criticised the tax as unfair and argued that
foreign rivals should be included to level the playing field.
A Senate committee on Monday recommended the bank tax should
be reviewed in two years and possibly waived in times of
financial distress, but Treasurer Scott Morrison on Tuesday
rejected those arguments.
"There's no need to do any of those things," he told the
Australian Broadcasting Corp.
Moody's also downgraded the New Zealand subsidiaries of the
Australian banks in line with their parents.
The banks, with the exception of NAB, have acknowledged the
ratings downgrade but have not commented any further. NAB has
not yet provided any comment.
(Reporting by Jamie Freed; additional reporting by Sonali Paul
in MELBOURNE; Editing by Stephen Coates)