ABA publicly disagrees with Professor
(14 October 2009 – Australia) The Australian Bankers’ Association (ABA) has publicly announced its disagreement with economist Professor Ross Garnaut’s comments that Australia’s banking system was insolvent during the financial crisis.
Mr Garnaut was interviewed on ABC’s 7.30 Report on Monday about his views on the Australian banks stability during the financial crisis.
Mr Garnaut said, that the banks were having trouble rolling over their huge external debt, and without the government guarantee on wholesale borrowing, they may not have been able to fund their liabilities.
The ABA has disagreed, however, with his comments and said that the evidence is that Australian banks were not insolvent and that the wholesale funding guarantee was introduced as a means of ensuring banks could maintain lending growth, and to not restore the solvency of the banks.
The ABA highlighted that the global financial crisis commenced in August 2007, yet there was no government wholesale guarantee introduced until one year later.
Up until this time the banks had been able to fund their lending and the wholesale guarantee scheme was introduced as a response to similar schemes introduced by other countries, the ABA added.
The ABA said that while it has not yet examined the evidence put forward by Professor Garnaut in his book investigating the global financial crisis, the claim that the Australian banking system was insolvent at the time of the crisis is contradicted by a lot of evidence.
Mr Garnaut is well known for authoring the climate change report that helped shape the Government’s emission trading scheme.
Mr Garnaut said, that the banks were having trouble rolling over their huge external debt, and without the government guarantee on wholesale borrowing, they may not have been able to fund their liabilities.
The ABA has disagreed, however, with his comments and said that the evidence is that Australian banks were not insolvent and that the wholesale funding guarantee was introduced as a means of ensuring banks could maintain lending growth, and to not restore the solvency of the banks.
The ABA highlighted that the global financial crisis commenced in August 2007, yet there was no government wholesale guarantee introduced until one year later.
Up until this time the banks had been able to fund their lending and the wholesale guarantee scheme was introduced as a response to similar schemes introduced by other countries, the ABA added.
The ABA said that while it has not yet examined the evidence put forward by Professor Garnaut in his book investigating the global financial crisis, the claim that the Australian banking system was insolvent at the time of the crisis is contradicted by a lot of evidence.
Mr Garnaut is well known for authoring the climate change report that helped shape the Government’s emission trading scheme.
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