On 12 October 2008, the Australian Government announced a set of arrangements for the protection of depositors in Australian deposit-taking institutions (ADIs) and a guarantee of the wholesale funding of these institutions.[2] Thus there are now two distinct guarantees — a deposit guarantee and an issue guarantee — that embrace the great bulk of liabilities of any Australian bank.
The aim of these measures was to promote stability in the Australian financial system by supporting confidence in the participating financial intermediaries, and to ensure continued access to funding at a time of much disturbance in international financial markets.
The decision to offer both deposit and wholesale funding guarantees on the scale announced on 12 October was unprecedented. Such a possibility had never been contemplated in any prior discussions. Repercussions from these measures have brought additional commitments to compensate financial entities other than deposit-taking institutions for their loss of a ‘level playing field’. What, then, are we to make of this most substantial commitment?
[2] These measures apply to all entities incorporated in Australia; equally to foreign-owned as to Australian-owned ADIs. Branches are limited in their coverage by these guarantees.