This indicates that the Australian system has sufficient regulatory oversight to keep high-risk obligations to a minimum. Despite being well-positioned from the outset, Australian banks remain saddled with some toxic assets (worthless MBSs and securities backed by insolvent financial institutions). Moreover, they found themselves at a competitive disadvantage. When foreign banks received government backing, their credit rating improved to the level of government securities. This resulted in a disadvantage to Australian banks. Thus, they petitioned for government assistance in order to remain globally competitive (Grubel & Bathgate, 2008).

The financial crisis of the early 1990s instilled strong risk management principles in Australia's banks, which has led to their insulation. Nevertheless, faced with exposure to bad assets, the banks have been forced to cut costs in order to better weather the storm. It is estimated that the banking sector will shed around 10,000 jobs this year (Insead, 2008). Other cost-cutting measures are also being taken by the banks, as part of improving efficiency in the face of an expected decrease in revenues as the economy slows. Part of this cost-cutting has involved the use of acquisitions in order shore up market share and increase economies of scale (Ibid).

All told, the response of Australian banks to the global financial crisis has been relatively muted. They are not heavily exposed to toxic assets, and did not engage in risky lending of their own. They were forced to take steps to remain competitive on the international scale, and to reduce costs to offset a slowdown...

However, Australian banks still have access to capital and remain sufficiently liquid to lend it. This means that while it is not business as usual for Australian banks, neither is the situation at the crisis stage. Indeed, Australia has expanded its presence in the international stage with regards to financial industry policy and regulation, joining the Basel Committee and playing a more active role in the Financial Stability Forum (Ellis, 2009).
Works Cited:

Knowledge @ Wharton: Subprime Crisis website. Retrieved April 28, 2009 from http://knowledge.wharton.upenn.edu/special_sections/subprime/

Johnston, Eric. (2008). Australia hit as Crisis Grows. The Age. Retrieved April 28, 2009 fromhttp://business.theage.com.au/business/australia-hit-as-crisis-grows-20080916-4hy6.html

Leslie, Tim. (2009). Australia to emerge from crisis 'stronger than before'. ABC News. Retrieved April 28, 2009 from http://www.abc.net.au/news/stories/2009/03/29/2529118.htm

No author. (2008). Canada rated world's soundest banking system. Reuters. Retrieved April 28, 2009 from http://www.reuters.com/article/ousiv/idUSTRE4981X220081009

Grubel, James & Bathgate, Adrian (2008). Australia guarantees bank deposits to combat crisis. Reuters. Retrieved April 28, 2009 from http://www.reuters.com/article/topNews/idUSTRE49B0M420081012?feedType=RSS&feedName=topNews

Ellis, Luci. (2009). The Global Financial Crisis: Causes, Consequences and Countermeasures. Reserve Bank of Australia. Retrieved April 28, 2009 from http://www.rba.gov.au/Speeches/2009/sp_so_150409.html