Joint Submission from the RBA and APRA to the Inquiry into Bank Funding Guarantees Introduction

The government guarantee arrangements for deposits and wholesale borrowing were introduced in response to extraordinary developments in the global financial system. They were designed to support confidence of depositors in authorised deposit-taking institutions (ADIs) and to help ensure that these institutions continued to have access to capital markets. The arrangements have been successful in meeting these objectives and as such, they have made an important contribution to the stability of the Australian financial system. They have also ensured that the overall availability of funding has not been a constraint on the capacity of Australian banks to lend.

The paper is structured as follows. Section 1 discusses the background to the introduction of the guarantee arrangements. Section 2 outlines the arrangements, with reference to those in place internationally. Section 3 examines developments in various markets following the announcement of the guarantee arrangements. Section 4 details the use of the arrangements, with a focus on long-term wholesale funding.