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No change to guarantee: Swan

Staff Reporter 3 minute read

The federal government has quashed rumours that it is set to overhaul its $110 billion bank funding guarantee.

The guarantee has come under attack in recent months as its existing price structure is believed to punish the smaller banks.

Federal treasurer Wayne Swan said the government would continue to monitor the program but ruled out making any substantial changes after announcing an extra $8 billion investment in mortgage securities.

Under the guarantee, smaller lenders with lower credit ratings are forced to pay higher costs than the big four banks.

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Banks with a AA credit rating pay an annual fee of 0.7 per cent for the government guarantee, while those with an A rating pay 1 per cent and those with a BBB rating pay 1.5 per cent.

Bank of Queensland chief executive David Liddy said yesterday that the guarantee had cost the regional bank upwards of $10 million.

“It has been a competitive disadvantage to us in terms of access to the tune of about $10 million impact on our bottom line this year as a result of paying 80 basis points more than a major pays,” Mr Liddy told an investment conference in Sydney.

No change to guarantee: Swan
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