The Reserve Bank of Australia said in its half yearly financial stability review that Australian banks continued to emerge from the world recession as increasing earnings from lending managed to offset the rising bad debts. The bank added that the financial system remain resilient.

The RBA said that banks in Australia faced a modest drop in profits and they are in a better situation than other lenders in other economies in case more deterioration in the world economy happened, worth mentioning that the largest four banks in Australia reported combined profits after tax A$8.6 billion ($$7.4 billion).

However, the central bank said in its report that the outlook for the banking system improved from the past six months, but it still facing some challenges which is the prospect of higher loan defaults, noteworthy that Australia's largest banks reported charges for bad and doubtful debts of A$6.2 billion in the first half of this year compared with A$2.8 billion in a year earlier.