Author: Timo Henckel

The Australian bank guarantee (officially the ‘wholesale lending guarantee’)—effective since November 2008 to prevent local financial markets from following the rest of the world into a tailspin—is being withdrawn in April. In his announcement of the withdrawal earlier this year, Treasurer Wayne Swan argued that the need for further government guarantees had been overcome as Australian banks had successfully weathered the storm sweeping through the global credit markets.

The guarantee underwrote the large funds (well in excess of $100 billion) which Australian banks have routinely received from overseas capital and money markets and which enabled them to have loan/deposit ratios greater than 100 percent. Read more…