Arrears rates in some areas have continued to creep up, but asset quality generally remains good (especially by international standards). Despite the uncertainties about Europe that I’ve already referred to, conditions in funding markets for the Australian banks have improved since the crisis, and so has system-wide growth in deposit funding. Domestic securitisation markets have been recovering.
These developments have helped smaller lenders to regain some of the market share lost during the crisis period. Aggregate lending by banks has been relatively subdued in the past few years. Lending to the housing sector has continued to expand, but at a slow pace, while business lending has tended to fall, with businesses relying more on internal funding and equity raisings.