Australian Banks Express Support For Establishment of Government Lending Fund

Post by Sharat on January 26, 2009 · Under Australian Economy, banking · Comment 

Australian Banks have expressed keen support for the government initiative to establish a fund which would cover any potential funding gaps left by international banks retreating from the Australian market.

Speaking to reporters last Thursday, NAB Chief Executive Mr. Clyne said that so far there had been no evidence of international lenders exiting Australia (although last Wednesday Toronto Dominion Bank announced it was folding its Australian investment banking franchise TD Securities into its Singapore office).

Mr. Clyne did however say that it was vital should international banks beat a retreat, that the Government and domestic banks should be ready to step in and offer refinancing options to Australian borrowers.

The biggest funding problems would be in commercial property, a sector where Australian banks are not keen on increasing their exposure. “I think this is the time when strong, functioning, major banks look at partnership opportunities with the Government on a whole range of issues,” Mr Clyne said.

Weak international banks are expected to use the rollover of large syndicated loans as an opportunity to withdraw from the Australian market over the next couple of years cutting back on lending, focusing instead on their own domestic markets, nursing back to health, cash strapped balance sheets.

After discussions with the banks, the Government is finalising plans that could see it effectively become lender of last resort to Australian corporate borrowers. The Government is determined to ensure that it acts ahead of any funding crisis in the Australian market.

The plan would see the establishment of a multi-billion dollar fund which would provide a special and temporary facility for Australian borrowers, which would be funded both through the sale of government debt and contributions of up to A$500 million each from the big domestic banks.  Such a fund would have the advantage of being relatively quick to set up.

NAB is understood to have been the most active bank campaigning in Canberra for the creation of the corporate credit fund. Westpac has also been close to the negotiations.

Australian Bank Account Comparison

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