More than $US10 billion has been wiped off the value of Australian banks, and that could cause a significant blow to their ability to lend to the rest of the world, according to a report.

Key points:The Australian Financial Services Commission has warned the global fallout could be hugeThe banks have been forced to take a big hit as a result of the financial crisisAustralia’s biggest banks have all been hit hard by the global financial crisis.

“The impact on the global economy is going to be profound,” the Australian Financial Service Commission (AFSC) warned in its report released this week.

“While we do not yet know the full extent of the impact of the global economic fallout on the Australian economy, the impact will be significant, both economically and socially,” the report said.

The commission’s warning came as it revealed the Federal Government has lost $US1.3 billion in the first quarter alone due to the global downturn.

“Australia’s financial system is still fragile and there is an ongoing risk of contagion to the banking system,” the AFSC said.

“Although the risks of contagious failure are limited, there is a risk that financial stability could be disrupted and that the economy could suffer.”

In addition, the extent to which the global banking system has responded to the crisis in a timely fashion is critical to the viability of the banking sector and the overall economy.

“Key points:-The commission warned Australia’s banks were at risk of “significant systemic impact” if the global crisis worsensThe report said Australia’s biggest three banks – Western Australian, Northern Territory and Adelaide-based ANZ – have all seen significant losses as a direct result of a global financial collapse.

It said the combined loss from all three was equivalent to a loss of about $US50 billion.”

As a result, the Australian banking system is in a vulnerable position, with a substantial degree of systemic impact, if the effects of the crisis become more pronounced,” the agency said.