Commercial banks in Australia have been able to score high marks in the International Monetary Fund stress test that evaluates how banks would person in the conditions of severe recession. The Washington-based global fund awarded high marks to the banks in the country and this will help dismiss fears that the banking sector would face a decline due to a fall in housing prices in the country.
As a part of the stress test, IMF assumed a 5 per cent contraction in gross domestic product and 35 per cent drop in house prices to find out how a particular bank would perform and whether it will be able to survive in such conditions. Australia's top four banks, Commonwealth Bank of Australia, Westpac Banking Corp., National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd fared well in the stress test.
Cheng Hoon Lim, a deputy division chief within the IMF's International Capital Markets Department said, "We think the financial system passed with full marks. We like what we see; we think that the house is in good order."
The IMF has increased its surveillance of the global banking system since the crippling recession. It is planning to assess world's top-25 banking industries every five years.