Moody's Investors Service says that Australian banks are facing a growing number of headwinds due to increasing household leverage and persistently low interest rates, which are increasing the banks' sensitivity to shocks.

"These headwinds could, over time, put pressure on the credit profiles of Australia's major banks, particularly in the context of their very high ratings," says Frank Mirenzi, a Moody's Vice President and Senior Analyst.

"Whilst solvency and liquidity buffers have improved in recent years, the path of future balance sheet strengthening is likely to be slower than in previous years -- at a time when risks continue to rise," adds Mirenzi.

Moody's conclusions were contained in a just-released report on Australian banks, titled, "Australian Banks: Rising Leverage And Cyclical Challenges Pose Risks".

Moody's says that the weak state of the operating environment is reflected in Australia's accommodative monetary policy, characterized by a historical low in the Reserve Bank of Australia's (RBA) policy rate. This is likely to persist over the next 12 months.