Banks support govt's deposit guarantee

The banking industry has applauded the government's move to guarantee bank deposits
to shore up public confidence in lenders in the face of the global financial crises
.
Commonwealth Bank of Australia (CBA) said it understood the government's motives to
shore up support for the domestic banking system, which the bank said was well
regulated, well capitalised and historically sound.
"The current volatility in global financial markets is extraordinary and the bank
acknowledges that the government has had to make some difficult decisions to restore
public confidence," CBA said in a statement on Monday.
"We understand the government's motives and support its intention to revert to
normal market practice once the crisis stabilises."
After a two-day meeting over the weekend, the government said it would repay
household and business depositors of any Australian financial institution that fails
over the next three years.
The unlimited guarantee also extends to building societies, credit unions and
locally incorporated subsidiaries for foreign banks, and will be reviewed after
three years.
The plan also guarantees the borrowings of Australian banks in international credit
markets, and extends a program to shore up the mortgage market through the purchase
of an extra $4 billion of residential mortgage-backed securities.
The government's guarantee followed decisions by European leaders to guarantee new
bank debt and keep distressed banks afloat after British Prime Minister Gordon Brown
set up a STG50 billion ($A130.43 billion) taxpayer-funded program to rescue eight UK
lenders.
The "unprecedented" conditions that gave cause to the government's move was
warranted given similar regulatory intervention offshore, according to National
Australia Bank (NAB).
"While ordinarily we would say there is no need for such as measure as our banks are
well regulated and well capitalised, given that other governments around the world
have taken similar steps, we welcome the government's decision and we are supportive
of the move," NAB said on Monday.
Westpac declined to comment and ANZ executives were unavailable.
The Australian Bankers Association underlined the security of the domestic banking
system.
"At no time has deposit funds in Australia been under threat," chief executive David
Bell told AAP.