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Healthy banks will restore global economy

The Reserve Bank of Australia’s head of financial stability deparment, Luci Ellis believes that the global economy will only recover once the credit supply and the world banking systems are “restored from their sick beds.”

In an speech at the Victoria University of Technology conference ‘Australia in the global storm: A conference on the implications of the global financial crisis for Australia and its region’, Dr. Ellis said that it was crucial that the financial system is revived believing, “restoring the global banking system to health is a precondition for a recovery in credit supply and economic activity.”

Dr Ellis said Governments were on the right track, by giving more support to financial institutions and markets, but more needs to be done to revive the global economy.

“Most have ensured banks’ access to funding by guaranteeing wholesale debt issuance; some have injected capital into banks; and a few have helped banks to reduce the risk in their balance sheets.

“For the time being, credit conditions will probably still be tighter than had been the case a few years ago.”

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