Government guarantees bank deposits

In a move to sure up confidence in the domestic banking system the federal government announced yesterday that it will guarantee all Australian bank deposits as the global financial system deteriorates.

Prime minister Kevin Rudd said that reviewing international developments the Australian Government decided it should act to provide guarantees similar to those provided in many international countries.

“If we do not do so [provide guarantees] Australian financial institutions could, over time, find it more difficult to borrow in international markets,” Mr Rudd said.

Under the new Financial Claims Scheme, the government will guarantee all deposits held by Australians in Australian-owned banks, subsidiaries of foreign banks and building societies and credit unions.

The guarantees will apply immediately, with no limit on deposits covered by the scheme for a three year period.

The Government will also guarantee term funding for up to five years for all local ADIs in return for a fee.

“These measures will assist Australia’s financial institutions weather the global financial turbulence,” Mr Rudd said.