Australia moves to increase guarantees for bank deposits

October 12th, 2008 - 9:12 am ICT by IANS  

Sydney, Oct 12 (DPA) Australia is set to join other countries struggling to maintain investor confidence by raising the level at which it guarantees bank deposits.The proposed threshold was 20,000 Australian dollars ($13,200) but the government is expected to raise this to 100,000 Australian dollars.

Prime Minister Kevin Rudd has said previously that local banks had the resilience to withstand any runs against them, but he has since come round to the view that Australia needs to keep in step with guarantees offered for bank deposits in the US and Europe.

Finance Minister Lindsay Tanner said: “The problem we have, of course, is that when fear of this kind spreads from the US, through Europe and across the world, a relatively small economy like Australia inevitably is influenced by that.”

Opposition Liberal treasury spokeswoman Julie Bishop urged the government to assuage those calling for a higher threshold.

“People are concerned about their deposits in building societies and credit unions and the junior banks,” she said. “They have no need to be, but there is talk of a movement of deposits to the Big Four banks.”

Rudd is being urged to intervene with more government money to help keep non-bank lenders afloat, too.

Two weeks ago, second-tier banks and non-bank lenders were buoyed when the government offered to buy residential-mortgage-backed securities worth 4 billion Australian dollars. Those financial institutions now say more buyouts are needed because the international credit market is in stasis.

The Big Four high street banks don’t have the same problems as their smaller rivals or the non-bank lenders, because they raise their capital from customers’ accounts. The securities would be held until the market was more liquid and they could be sold.

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