Banks raise $60 billion in wake of guarantee

Australian banks have raised over $60 billion in longer-term wholesale financing since the Federal Government introduced its Bank Guarantee, according to the Australian Prudential Regulation Authority (APRA).

The information, contained in an APRA submission to the Senate Economics Committee inquiry into bank mergers, also makes the point that the largest banks were well positioned irrespective of the Bank Guarantee.

"Notwithstanding dislocations in global funding markets, these institutions have been able to continue to expand their balance sheets to support new lending throughout the crisis," the APRA submission said.

It said the smaller institutions such as building societies and credit unions had not traditionally relied on wholesale funding and had strong retail deposit franchises but, on their own, lacked the size and scope to be a source of significant competitive pressure.

The APRA submission said the largest impact of the crisis had been on the middle-tier institutions and that the securitisation markets, on which regional banks, some larger building societies and unregulated wholesale lenders had relied in recent years, had effectively been closed.

The APRA submission also dealt with the question of so-called offshoring by banking and financial institutions but made clear that while institutions needed to notify the regulator of their intentions, APRA did not prescribe where particular banking services were to be conducted.

It said its regulatory concerns involved the risks associated with offshoring rather than any competition implications.