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This paper reviews Australian banks' performance from an international perspective, with a focus on changes in capital and liquidity risk. The paper analyses the extent of any vulnerability that might arise from a potential deterioration in the funding markets and discusses whether liquidity rules, such as those being considered by the Basel Committee on Banking Supervision, may help reduce banks' liquidity risks and improve financial stability. Australian banks were resilient to the global financial crisis, thanks to good fundamentals and a sound prudential and supervisory framework. Banks were not substantially affected by the crisis on the asset side of their balance sheet, with little exposure to U.S. structured credit products and a limited increase in nonperforming loans.
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