While the average anxiety level among 700 banks across the world was at 3.15, Australian banks recorded an even higher anxiety level of 3.28 out of a maximum of 5.

The Banking Banana Skins 2012 report by the Centre for the Study of Financial Information (CFSI) and PricewaterhouseCoopers (PwC) explained the higher-than-average anxiety level among Aussie lenders to the belief of local bankers that the world is on the brink of another fresh round of financial crisis.

Besides the higher cost of longer-term funding due to the European sovereign debt crisis, it did not help that both the World Bank and the International Monetary Fund downgraded their global growth forecasts in the last few days amid warnings of chaos worse than the 2008 global financial crisis.

The average 3.15 anxiety level is a record-high rate in the 13 years that the CSFI and PwC have prepared the report. The report, done every two years, identified the top five bankers' fears as: macroeconomic risk, credit risk, liquidity, capital availability and political interference.

Macroeconomic risk rose from only number four in the 2010 report to number one in the current report, while political interference tumbled down to fifth place from first place two years ago. Credit risk remained on second spot.

However, for Australian bankers, macroeconomic risk also topped their worst fears but it was already third on their list two years ago. Political interference consistently was second on their roster of worries while liquidity jumped to third spot from seventh.

While Aussie bankers thought they were at the mercy of events outside the country which they have no control over, PwC Banking and Capital Markets leader Stuart Scoular pointed out that Australian lenders are well-positioned to capitalise on weaknesses in the global environment.

He said that the 18 Australian survey respondents, which counted bankers, regulators and industry observers, were confident about handling the risk better than the global average and new developments may even opportunities for Aussie banks to expand beyond the country's borders.

Beyond the issues of capital availability and corporate governance which many global bankers considered pressing ones, Australian lenders were more worried over new banking rules that they said were unjust and made to curb behaviours that were not problems in the country's banking system. Mr Scoular said the added burden hiked costs for banks at a time when they were cutting costs to prevent lower revenue growth.

To reduce costs, Australian banks announced the cutting of 7,500 jobs in the next two years.

The overregulation prompted one banker to warn that it could cut lending support and potentially lead some lenders to hike credit risks to offset costs due to more regulations. The banker cautioned that protectionist policies could stifle banking competition.

Australian Bankers Association Chief Executive Steven Munchenberg agreed with the banker's observation.

"We are seeing an unprecedented level of regulatory change hitting the Australian industry.... We are dealing with major new international rules such as Basel III, the increasing reach of U.S. lawmakers, such as with Dodd Frank and the Foreign Account Tax Compliance Act, and layer on layer of change from the federal government," The Australian quoted Mr Munchenberg.

Mr Scoular pointed out that many of the regulations made on Australian banks were in response to offshore problems that were not actually major issues for local lenders which made the Aussie banks feels they are being unjustly penalised. He added that more regulations would lead Australian banks to alter their business models and the products it offer.

"To some extent this no doubt reflects the increasing gloom that bankers, no matter which country they work in, regard the immediate future. On a deeper level, it reflects uncertainties in the economic environment and the long journey the Australian banks still have to navigate through ongoing regulatory reforms that are still taking shape," the report said.

The report added that the Basel III new requirements, which a few years ago seemed like a good idea, appears to be wrongly timed because of the lack of guarantee that big lenders would not play the role of economic driver that national leaders ask of banks, said CSFI Director Andrew Hilton.

The World Bank reportedly is willing to help lenders invest in risk mitigation programmes and capitalize as they comply with Basel III new standards to strengthen the international banking systems.

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