Banks lead rest of the world

Australia's big four banks enjoy some of the biggest profit margins in the developed world, an independent comparison reveals.

The Bank for International Settlements, effectively the central bank to the world's central banks, in its annual report released overnight shows how well Australian banks do compared with their international competitors.

Since 2008, the four have enjoyed the highest pre-tax profits of any developed world banking sector.

That performance was repeated in 2012, with Australia's banks enjoying almost a 10 per cent better margin than banks in Canada, which were the second most profitable.

That profitability was partly driven by having some of the highest net interest margins in the developed world. Only banks in Spain and the US had higher interest margins.

And despite complaints about the high cost of business, Australian banking operating costs were well below those for banks in Canada, Germany, Italy, Spain, Switzerland, Britain and the US.

But the BIS, one of the few global institutions to warn of dangers from the sub-prime mortgage system at the heart of the global financial crisis, is increasingly concerned about the developed world's finances and its central banks.

It said central banks, some of which continued to print money to prop up their economies, had played their part in protecting the global economy.

But those banks were not in charge of repairing budgets, improving the finances of households or making necessary economic reforms.

"Authorities need to hasten labour and product market reforms so economic resources can shift more easily to high-productivity sectors," it said.

Households, governments and businesses also had to finish the hard job of repairing bottom lines and governments had to intensify their efforts to ensure the sustainability of their finances.

The BIS said central banks had "borrowed time" for policy makers to get their own houses in order.