Gov secures bank deposits
(14 October 2008 – Australia) The Australian Federal Government has announced that it will guarantee all deposits of Australian banks, building societies and credit unions as well as Australian subsidiaries of foreign-owned banks.
The move by the Government to guarantee deposits follows marked deterioration in market conditions and the steps taken by governments around the world to guarantee the liabilities of their financial systems.
The guarantee amounts to a value of around A$1.2 trillion of deposits.
The Government said that while Australia’s banking institutions remain sound, well-capitalised and profitable with high asset quality, Australian financial system is however being affected by global events.
Recent developments in the international wholesale funding markets have created acute funding pressures that now pose potential risks to the total supply of finance to the Australian economy.
The decision to guarantee deposits has come in response to these recent developments.
As with other countries, the guarantee will operate over a period of three years and there will be no limit on the amount of deposits covered.
The Australian Government has also announced that it will guarantee wholesale term funding of Australian incorporated banks and other authorised deposit-taking institutions (ADIs).
The Government will offer the guarantee in return for a fee in respect of eligible non-deposit debt obligations of Australian ADIs and foreign subsidiary banks operating in Australia.
It will enable Australian institutions to raise funds overseas in the current tight conditions and will restore confidence in credit markets. The facility will be withdrawn once market conditions have normalised.
The guarantee amounts to a value of around A$1.2 trillion of deposits.
The Government said that while Australia’s banking institutions remain sound, well-capitalised and profitable with high asset quality, Australian financial system is however being affected by global events.
Recent developments in the international wholesale funding markets have created acute funding pressures that now pose potential risks to the total supply of finance to the Australian economy.
The decision to guarantee deposits has come in response to these recent developments.
As with other countries, the guarantee will operate over a period of three years and there will be no limit on the amount of deposits covered.
The Australian Government has also announced that it will guarantee wholesale term funding of Australian incorporated banks and other authorised deposit-taking institutions (ADIs).
The Government will offer the guarantee in return for a fee in respect of eligible non-deposit debt obligations of Australian ADIs and foreign subsidiary banks operating in Australia.
It will enable Australian institutions to raise funds overseas in the current tight conditions and will restore confidence in credit markets. The facility will be withdrawn once market conditions have normalised.
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