The Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding (Australia GFC)

Abstract

The Australian Guarantee Scheme for Large Deposits and Wholesale Funding was developed in 2008 shortly after the failure of Lehman Brothers. It was designed to foster financial-system stability and confidence and to help depository institutions continue to access funding during a period of volatility. In addition to a guarantee for large deposits, the scheme allowed institutions to apply for a government guarantee for newly issued wholesale liabilities with maturities of up to five years; in return, the institutions paid the government a monthly fee based on their credit rating and the value of the debt guaranteed. The entire Guarantee Scheme became operational in November 2008 and closed to new issuance in March 2010, by which time 16 institutions had issued about A$166 billion ($108.7 billion) of guaranteed securities. The Guarantee Scheme’s wholesale funding component formally ended in October 2015, a few months after the final guaranteed instrument matured. It incurred no losses, no claims were made against it, and it earned A$4.5 billion ($2.95 billion) in fees for the support provided.

Keywords: wholesale funding, government guarantee, ADIs, guaranteed instruments, Australia

JEL Classification: G01,G28