Government guarantee for banks to remain
Wednesday September 9, 2009
Australia's improving economy and forecasts for the health of the financial markets are seeing the level of demand for the Federal Government's guarantee to underwrite debt raisings diminish. Australian banks and other financial institutions that operate within the Australian credit markets are reportedly using less of this guarantee as more reports of rising levels of investor confidence and credit spreads.
In fact, over recent months less than 25 per cent of Australian trading banks new debt raisings even had the Government's "AAA" credit rating backing, a massive decline from 90 per cent in the first quarter of 2009. Figures show that in Australian banks industry over $100 billion has been raised, predominately by the big four banks and investment banks, since the commencement of the guarantee.
However, it was noted that while interest and use of this guarantee may have become somewhat diminished over recent months, it is nowhere near being scrapped or dropped with some local financial players still accessing, along with the need to continue to raise money on international markets.
The government guarantee was designed to stem the collapse of the Australian credit markets and became available in October 2008, proving popular during the worst of the Global Financial Crisis.
The decision to keep the government guarantee in action was a result of the G20 finance ministers' meeting held over recent days which saw the unified decision to lift all credit underwriting arrangements worldwide in unison at a later date. This later date, still unfixed, is to create further stability for many banks globally that may still be requiring governmental assistance.
Treasurer Wayne Swan, who attended the meeting, stated, ''No one country can simply pull out their guarantee arrangements without exposing their financial institutions to the risk of not necessarily being able to arrange the funding that they need to raise,''
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