APRA backs Gov't guarantee
A senior official within the Australian Prudential Regulation Authority has defended the Government’s decision to guarantee bank deposits.
The general manager of the Australian Prudential Regulation Authority, David Lewis, has used an address to a Melbourne business expo to claim the intervention was both timely and necessary.
He pointed to the fact that while Australian banks had been left largely unaffected by the financial crisis, failures overseas had left global financial markets “skittish and unstable”.
“If you are a bank, this is never a happy situation. There have been some telling reminders from overseas of just how quickly a bank — with otherwise sound assets — can fall into difficulty when liquidity and funding have been mismanaged. This is the area on which APRA has been focusing its supervisory attention,” Lewis said.
“It is also why APRA supported the Government’s intervention as prudent and necessary,” he said.
“The Government’s guarantee of deposits and term debt issues was designed to boost confidence in the Australian banking system and ease funding pressures. To date, it has had the desired effect.”
Lewis said that, so far, 19 countries had issued guarantees of some form or other in support of their banking systems.
“And we are not talking about ‘banana republics’ here: most of these are developed countries with established banking systems. Moreover, some countries have felt the need to go much further, making direct capital injections into troubled financial institutions,” he said.
AUTHOR
Mike Taylor
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