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A look at the wording of the govt guarantee on deposits

Discussion in 'Finance & Banking' started by Godfather, 15th Oct, 2008.

  1. Godfather

    Godfather Member

    Joined:
    12th Oct, 2008
    Posts:
    14
    Location:
    Brisbane
    Hi everyone,

    I'm reading from this link:
    Government Announcements - Guarantee of Wholesale Funding and Deposits

    The following sentences:
    "Fees to be charged for the facility
    The Government will charge the issuing ADI a fee for the guarantee. The fee is currently being determined. While the fee will take into account the extremely volatile and uncertain credit markets, it will be set so that it provides a disincentive for institutions to continue using the guarantee once market conditions have normalised."

    ...Queries:
    1) sentence "The Government will charge the issuing ADI a fee for the guarantee". Does this mean that every bank will be imposed the guarantee at least in the 1st year of the 3 year term?
    2) sentence "it will be set so that it provides a disincentive for institutions to continue using the guarantee once market conditions have normalised". So how can I check which institutions will be covered by guarantee and which ones will not be?

    Sorry for being so "italian" and so locked to wording, I probably come from the country that has got the highest number of laws and sublaws in the world but I want more clarity on this... I'm writing an e-mail to the treasury.:cool:
     
    Last edited by a moderator: 15th Oct, 2008
  2. jabba_jones

    jabba_jones Well-Known Member

    Joined:
    2nd Dec, 2007
    Posts:
    60
    Location:
    Sydney
    I read it as two seperate announcements:

    * Guarantee of wholesale funding
    * Guarantee of deposits

    The sentences you referred too relate to "debt securities issued by Australian owned banks" not savings accounts.
     
  3. Godfather

    Godfather Member

    Joined:
    12th Oct, 2008
    Posts:
    14
    Location:
    Brisbane
    Hi Jabba Jones, well spotted!!! :eek: You're right... I was reading the 1st part... :p