(21 February 2013 – Australia) Bank of Queensland (BoQ) has plans to buy back up to A$653 million in taxpayer-guaranteed debt as it takes advantage of improving funding-market conditions.Under the guarantee of wholesale borrowing, which provided a lifeline to the sector at the height of the global financial crisis, banks have been able to effectively rent the government’s AAA credit rating in return for a fee.
Banks embraced the guarantee, which has since closed to new debt issues, with almost A$170 billion in debt guaranteed by the taxpayer in early 2010.
On Tuesday BoQ, which was charged a larger fee than the big four for using the guarantee, offered to buy back a batch of government-guaranteed bonds that will mature in October.
Commonwealth Bank, Westpac, ANZ and NAB have all made similar moves in recent months, delivering healthy returns to investors who purchased the bonds at the peak of the financial crisis.
The rush comes as banks face more favourable conditions on funding markets, a trend that some industry figures say could ultimately flow into lower rates on mortgages and term deposits.