Financial regulators remain confident Australia’s banking system, including smaller banks, can ride out ructions in global financial markets.

The Australian Prudential Regulation Authority ramped up its monitoring regime after the collapse of Silicon Valley Bank and UBS’s takeover of Credit Suisse.

While APRA’s intensive supervision continues, its investigations have so far reinforced its belief Australian banks, including smaller banks, are well-capitalised and have access to enough liquidity.

Rapid action from regulators and authorities in the US and Europe has so far stabilised markets and improved confidence, although some volatility remains.

Treasurer Jim Chalmers said Australia was not immune to volatility in global financial markets.

“But Australians should be reassured that our banks are well regulated, well capitalised and highly liquid and are in a better position than most to deal with these disruptions,” he said.

Dr Chalmers said actions taken by central banks and international financial authorities were working to calm markets.

“While we’ve seen some strains in global funding markets, our domestic funding markets continue to function well,” he said.

Rally splutters as Europe ploughs on with rate hikes

Europe’s post-Credit Suisse rebound has spluttered to a halt as Switzerland and Norway show the year-long cycle of sharp interest rate rises is by no means over.

The Bank of England (BoE) also raised interest rates for the 11th time in a row by 25 basis-points on Thursday, but said a surprise resurgence in inflation would probably fade fast, prompting speculation about whether it had now ended its run of hikes, Reuters reported.

Stock markets had been relieved when the Federal Reserve hinted at a pause after its latest quarter-point rise on Wednesday, so the sight of Switzerland’s SNB jacking its rates up again despite its torrid week was a reminder not to get too carried away.

The European-wide STOXX 600-share index fell 0.75 per cent with banks and insurers the main culprits again, suffering 1.6 per cent-2.0 per cent drops.

Norway had also hiked, although MSCI’s main world share index was still in positive territory after overnight gains in Asia.

“The measures announced at the weekend … have put a halt to the crisis,” the SNB had said, referring to Credit Suisse’s shotgun marriage with UBS, a view also voiced by Germany’s powerful Bundesbank chief overnight.

The pound added to its almost 5.0 per cent rally in the past fortnight with a 0.3 per cent rise to $US1.2315 ($1.8296) while UK government bond yields, which reflect borrowing costs, were outliers globally as they moved fractionally higher too.

The dollar index, which measures the greenback against the world’s other six top currencies, was licking its wounds having hit a seven-week low after the Fed.

Both the euro and yen were up on the day, as was the Swiss franc after the SNB’s half-point hike.

Elsewhere in the bond markets, although UK yields were up those on German Bunds were down at 2.281 per cent, happy to match the falls seen on 10-year US Treasuries yields that had taken them to 3.440 per cent.

Fed Chair Jerome Powell had said on Wednesday that stresses in the banking sector could dent lending and have a significant impact on the US economy, reducing the need for the central bank to raise rates to tame inflation.

Germany’s European Central Bank rate setter Joachim Nagel had even said he now thought the ECB was “approaching restrictive territory” with its rates, referring to a level that curtails growth.

“I do not know when we will more or less be there … but what I know is that when we are there we have to stay there and not come down too early,” he said.

Among commodities, US crude fell one per cent to $US70.19 ($104.28) per barrel and Brent was at $US76.04 ($112.97), down 0.85 per cent.

Wall Street futures were up though, having ended sharply lower overnight after the Fed relief was offset by US Treasury Secretary Janet Yellen telling MPs she had not considered or discussed creating “blanket insurance” for US banking deposits without approval by Congress.

Markets are now pricing in an approximately 65 per cent chance of the Fed pausing at its next meeting, in May, and a 35 per cent chance of a 25-bps-rise then, the CME FedWatch tool showed.

— AAP