Banks 'tightening lending' - RBA

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By Robert Carry

Australian banks have begun to tighten up terms and conditions on loans, John Broadbent, head of the Reserve Bank of Australia's domestic markets department has said.

However, he pointed out that the changes in lending have not yet had an impact on the banks' ability to increase equity.

"Firms have been able to refinance as needed, and it has been firms' desire to reduce leverage against the background of an uncertain economic outlook that has lead to a reduction in the demand for credit,” Broadbent added.

According to RTT News, listed corporations raised $60bn in equity during 2009 - more than triple the annual average of around $20bn during each of the three years prior to the global financial crisis.

Broadbent pointed out that with net debt falling corporates continuing to stockpile record equity, the composition of external funding shifted away from debt toward equity.

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