Calls to end Gov guarantee
(1 June 2009 – Australia) Fund managers are reportedly among those calling for the federal government deposit guarantee to be ended, in a bid to open up the industry.
The Australian newspaper reported that mortgage income fund managers have asked the Federal Government to end the government guarantee on bank deposits as a first step to reopening the A$25 billion industry.
The reasoning from the fund manager side is that since the deposit guarantee began, investors have pulled their money from a range of non-guaranteed investments such as mortgage income funds.
The guarantee has reportedly caused an A$8 billion-a-year flow of new lending to small and medium-sized business to be cut, as mortgage income funds have been a mainstay in small business and commercial property lending.
Industry representatives reportedly called for the Government to show confidence in the mortgage income industry with a staged lifting of the government guarantee ahead of its three-year sunset provision.
Investment and Financial Services Association chairman David Deverall said that it would be a positive step for many sectors of the finance industry
However, Australian Prudential Regulation Authority (APRA) chairman, John Laker, said that Australia should not remove its guarantee while other countries still have them in place.
He explained that it would be very difficult for a country to go it alone in removing the guarantee.
Laker said that in the current environment it'd be a very macho thing for the Australian Government to say that, because we've survived, we'll remove the guarantee because other governments may not do so.
The reasoning from the fund manager side is that since the deposit guarantee began, investors have pulled their money from a range of non-guaranteed investments such as mortgage income funds.
The guarantee has reportedly caused an A$8 billion-a-year flow of new lending to small and medium-sized business to be cut, as mortgage income funds have been a mainstay in small business and commercial property lending.
Industry representatives reportedly called for the Government to show confidence in the mortgage income industry with a staged lifting of the government guarantee ahead of its three-year sunset provision.
Investment and Financial Services Association chairman David Deverall said that it would be a positive step for many sectors of the finance industry
However, Australian Prudential Regulation Authority (APRA) chairman, John Laker, said that Australia should not remove its guarantee while other countries still have them in place.
He explained that it would be very difficult for a country to go it alone in removing the guarantee.
Laker said that in the current environment it'd be a very macho thing for the Australian Government to say that, because we've survived, we'll remove the guarantee because other governments may not do so.
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