Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

I thank the member for her question. The government is committed to protecting depositors in these uncertain times. The announcement by the Prime Minister the Sunday before last was a very important announcement in terms of not just confidence in banking but also confidence in the wider financial system. That is why we announced a comprehensive guarantee, because you have to move with speed and comprehensively. This was supported by the Treasury and by the RBA, and it was fully supported by APRA. It was fully supported by all of our regulators. At the time of the announcement, we indicated that we would be consulting with industry as well as with our international counterparts on the details of the guarantee. We have been doing that.

I would just like to quote from a speech that I gave in the House last Wednesday. It was the second reading speech that I gave on the bill that was introduced. These comments seem to have been missed by the opposition in the debate and discussion that has been going on since then. This is what I said in the second reading speech:

The government is consulting on the interaction between this guarantee on eligible wholesale borrowing and the guarantee on deposits.

If desirable, the government will proceed with measures to clarify the intersection of these guarantees and facilitate their operation.

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The government will ensure that the short-term money market remains viable and that the deposit guarantee does not provide disincentives for market participants from operating in this market.

That is what I said to the House last Wednesday. The regulators are consulting with industry, as they should, to ensure that the guarantee of deposits and wholesale borrowings does not adversely affect the efficient operation of the short-term money market.

As members will be aware, the deposit guarantee and the term funding guarantee applies to Australian owned banks, Australian ADI subsidiaries of foreign banks, credit unions and building societies. The deposit guarantee applies to deposits in any currency and will extend to an Australian ADI’s branch operations in another jurisdiction. We are working with our international counterparts to ensure that appropriate arrangements are in place for foreign bank branches operating in Australia.

None of these are new issues, but they are ones that the government has been well aware of and has been addressing in consultation both domestically and abroad. They are important issues, so it is very important to get them right. Treasury expects to have concluded consultations shortly and to have finalised the details of the package shortly.

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