The Federal Governent has announced it will withdraw its guarantee of bank deposits, instituted during the global financial crisis to prevent investors’ money from being wiped out in the recession.
The nation’s top finance regulators—including the Reserve Bank and the Australian Prudential Regulation Authority—advised the treasurer, Wayne Swan, over the weekend that bank funding conditions had improved and that the guarantee was no longer needed. The funding guarantee has helped banks raise more than $123 billion last year using the federal government’s AAA-credit rating.
Yesterday Swan said the government guarantee for both wholesale funding and deposits over $1 million would expire on March 31. The guarantee for bank deposits below $1 million will remain until at least October 2011.
”The guarantee played an important role during the global financial crisis. Now that markets have stabilised it looks like it’s time for it to come off and we support the government decision,” said a spokesman for ANZ. It last tapped the program in July.
Regional lenders Bank of Queensland and Bendigo Bank welcomed the removal of the guarantee. Smaller banks generally snubbed the program as they were required to pay a substantially higher fee for access to the AAA credit rating.
