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Australia May Back Smaller Lender Bonds, Age Reports

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Dec. 2 (Bloomberg) -- Australia may revive part of a government guarantee on funding for smaller lenders to help spur competition in the nation’s banking industry, The Age newspaper reported, without saying where it got the information.

Credit unions, building societies and regional banks may be given access to the wholesale guarantee as part of Treasurer Wayne Swan’s package of banking reforms to be released this month, the newspaper said. Other measures may include further support for the nation’s securitization market and helping credit union customers to use Australia Post branches for deposits and withdrawals, The Age wrote.

Bank of Queensland Ltd., Bananacoast Community Credit Union Ltd. and Members Equity Bank Pty Ltd. were among regional or smaller lenders that raised money under the original wholesale guarantee, which was introduced to ease funding pressures after the collapse of Lehman Brothers Holdings Inc. in September 2008 sparked a global credit freeze. The program was closed to new issuance on March 31 after Swan said banks no longer needed the backing to attract wholesale funding.

Adam Collins, spokesman for Swan, said by phone today that the government plans to release details of the reforms this month and won’t speculate on the contents before then.

Australia guaranteed A$144.9 billion ($140.2 billion) of debt under the guarantee arrangement as of October, according to information on a federal website.

Lenders have paid A$2.2 billion in fees in return for the backing, which allows them to sell bonds using Australia’s AAA sovereign rating, the website states. Banks rated AA- and above pay 70 basis points per year on their guaranteed debt to the government, while lenders rated A+ to A- pay 100 basis points and those with lower ratings, or no rating, pay 150 basis points.

To contact the reporter on this story: Sarah McDonald in Sydney at

To contact the editor responsible for this story: Will McSheehy at

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