Credit Risk in the Australian

This paper presents a brief overview of developments currently taking place in the Australian banking sector relating to the measurement and management of credit risk. Section I provides, as background, a sketch of the structure of banking in Australia. Section II considers some of the forces operating within the Australian banking and financial system to increase the significance of credit and capital management in banks. Section III outlines some of the credit risk management practices being adopted in the major Australian banks. Section IV looks at the implications of these developments and speculates on the scope for greater use of banks’ internal credit risk models, or other possible approaches, for capital adequacy purposes. A summary and brief conclusion are in Section V.