The RBA’s semi-annual review of financial system stability (FSR) observes that global financial conditions have been broadlyfavourable over the past six months while conditions in some emerging market systems deteriorated somewhat. However, the FSRwarns that the profitability of the euro banking system remains weak and non-performing loan ratios remain high. It also observesthere is still the potential that negative outcomes in the euro region could harm global financial stability. On this score, Australianbanks have little direct exposure to Europe and Asia for that matter but – residing in a global financial system – are exposed toswings in financial market sentiment, especially in the event of any future potential Eurozone financial meltdown.
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