Credit Risk in the Australian Banking Sector

This paper presents a brief overview of developmentscurrently taking place in the Australian banking sectorrelating to the measurement and management of creditrisk. Section I provides, as background, a sketch of thestructure of banking in Australia. Section II considers someof the forces operating within the Australian banking andfinancial system to increase the significance of credit andcapital management in banks. Section III outlines some ofthe credit risk management practices being adopted in themajor Australian banks. Section IV looks at the implicationsof these developments and speculates on the scope forgreater use of banks’ internal credit risk models, or otherpossible approaches, for capital adequacy purposes. Asummary and brief conclusion are in Section V.[...]