Bank underwriting government guarantee still available
Wednesday September 9, 2009
The latest G20 finance ministers' meeting will see the continuation of the Federal Government's guarantee to underwrite debt raisings, despite demand falling and the national economy improving. The G20 meeting of finance ministers worldwide resulted in the discussion and subsequent decision to lift all credit underwriting arrangements on a global scale at a later date, in order to allow greater stability to occur for bank institutions worldwide, with many still requiring their governmental assistance.
The Australian federal government guarantee was launched in October 2008 and offered assistance to all Australian bank and financial institutions to prevent the collapse of the Australian credit markets. Proving highly popular during the worst of the Global Financial Crisis, the number of new debt raisings with the Government's "AAA" credit rating backing has eased dramatically from 90 per cent in the first quarter of 2009.
The reasoning behind this fall in demand has largely been attributed to the improving national economy with forecasts indicating this improving status will continue into the new year as investor confidence and credit spreads begin to rise.
Although, the decline in interest and use of this guarantee is not widespread across the bank industry with some local financial players still accessing the option, with other nation's government guarantee programs still required for the majority of the banking industry.
Treasurer Wayne Swan, who attended the G20 meeting, stated, ''No one country can simply pull out their guarantee arrangements without exposing their financial institutions to the risk of not necessarily being able to arrange the funding that they need to raise,''
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