The Federal Government is attempting to save the banking sector by urging mortgage funds left out of its deposit guarantee plan to apply for banking licenses.
The Federal Government is attempting to save the banking sector by urging mortgage funds left out of its deposit guarantee plan to apply for banking licenses.
The move comes after days of talks with financial industry representatives looking to extend the Government’s guarantees on deposits to mortgage funds.
But in a speech to the Australia Unlimited roundtable last night in Melbourne, Prime Minister Rudd emphasised the guarantee would only become available if the funds transform into banks.
Rudd also says the Federal Government has instructed the Australian Prudential Regulation Authority to speed up banking license applications.
“Subject to the successful application of these financial institutions (which means meeting the prudential standards), they will of course be covered by the Government guarantee. But only if they meet the prudential standards of deposit-taking institutions,” he says.
“No government can, in good conscience, put taxpayers’ dollars at risk to support financial institutions which are not open, transparent, and properly accountable to Australian regulators.”
The PM, along with Treasurer Wayne Swan, has repeatedly rejected claims to extend deposit guarantees to mortgage and super funds.
But Investment and Financial Services Association CEO Phil Naylor says he “isn’t sure” whether a move to traditional banking formats will fix anything.
“My assumption is that a lot of these organisations may not particularly want to be a bank, that’s why they are operating in the format they are. I suppose we have to ask if that would that really solve the problem.
“We’re really trying to solve an unintended consequence in the Government’s original decision, and I’m not sure requiring institutions to become banks is necessarily the right move.”
See also Rudd’s deposit guarantee could take finance sector back 40 years
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