Effectively the end of March,Australia will end its bank deposit and bank funding guarantees.So said Treasurer Wayne Swan today, adding that these had served their purpose in helping to stabilise the financial system.Let us read the Reuters report on this.
"The government guarantees were announced in October 2008 to help banks maintain access to funding during the global financial crisis, and to ensure customer confidence in Australia’s banks.
Swan said the decision was based on advice from the Australian Council of Financial Regulators.
“The council ... has advised that bank funding conditions have improved such that the guarantee is no longer needed, and that no Australian institution will need the guarantee to fund themselves,” Swan said in a statement.
He said existing guaranteed liabilities for banks and lending institutions would continue to be covered until they matured, or until October 2015 for at call deposits.
“The guarantee has been vital to the stability of our financial system when others were collapsing across the globe, leading to the first contraction in the global economy since World War II,” Swan said in a statement.
“It gave our banks continued access to global capital markets on competitive terms, which has been critical in supporting the flow of credit through the Australian economy.”
He said Australian banks and other lenders had so far paid around A$1.1 billion (RM3.26 billion) for the use of the guarantee and will pay around A$5.5 billion over its full life."
Well looks like the Australian banking system can stand on its own. I guess they will now play by ear and the cost of funds will again be determined by market forces.With commodity prices going up once more, perhaps bank rate may just go up to that expected 4% again.
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