ANZ said that current volatile conditions in global markets have seen wholesale funding market for banks freeze again.
"Right now, markets are closed again, and this is what happens in this sort of situation," ANZ Chief Executive Mike Smith said after a speech to a business group.
ANZ shares ended the day down 73 cents, or 3.4 per cent, to $20.84, bringing the month to date loss to 12.8 per cent - the eighth-worst performer among the top 50 stocks.
Australian banks raise about $100 billion annualy from wholesale funding markets to bridge a gap between total loans and deposits.
Mr Smith, though, sought to clarify his comments, with the bank later sending out a statement indicating he was referring to European - and not Asian or US - markets that are seizing up.'
"European funding markets are essentially closed at the moment because of the uncertainty in Europe however Asian and US markets remain open," he said.
"While we will see volatility as the European crisis unfolds, the situation is more manageable than 2008 when we had the shock collapse of Lehman’s and Australian banks are well placed right now.
"ANZ has already completed its 2012 funding task and we have really had two years to anticipate and to plan for the scenario that’s now unfolding in Greece and southern Europe.
"It’s difficult to say what it will mean for funding costs but we need to bear in mind recent pressures have been caused by the cost of domestic deposits and that won’t change anytime soon," Mr Smith said in the statement releasted by the bank.
Appetite wanes
At the lunch itself, Mr Smith described our credit markets are the first to feel any change in sentiment.
‘‘Confidence goes, investor appetite gets stopped, people are all about capital preservation," Mr Smith.
‘‘They’re just not willing to invest, and credit markets always get hit first.’’
Banks around the world rely on credit markets as sources of funding so they can provide loans to their customers.
If those markets tighten up, it becomes harder and more expensive for banks to find the money they need.
Mr Smith’s comments came after ratings agency Fitch downgraded its credit rating of Greece, which has installed an interim government ahead of fresh elections in June.Also, ratings agency Moody’s has downgraded the debt ratings of 16 Spanish banks.
Mr Smith said he did not expect that there would be a major collapse of any financial institutions similar to that of Lehman Brothers at the start of the global financial crisis.
But he said it was hardly surprising that there was unrest in Greece given the tough austerity measures that it had been asked to initiate to access funds to help meet its debt commitments.
‘‘Surely, there’s got to be a better way,’’ he said.
‘‘I think the real problem in Europe now is not so much the economic contagion, as was previously the issue, but political contagion.
‘‘If Greece gets away ... of course the issue will be which other countries are going to follow.’’
Mr Smith said he believed the heart of the problem in the euro zone was the inability to separate the issue of political union from the concept of a common currency.
Reuters, AAP with BusinessDay