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Canberra/Wellington: Australia and New Zealand gave a blanket guarantee to all bank deposits yesterday in a move likely to raise pressure on other econ-omies to do the same, amid a crisis of confidence in the global financial system.
The two neighbours, both dominated by Australia's four major lenders, had portrayed themselves as having strong bank systems, especially Australia whose government and regulators gave repeated assurances it was well placed to weather the storm.
But Australian Prime Minister Kevin Rudd called a snap news conference on Sunday to say his government would guarantee Australia's entire deposit base of A$600-A$700 billion (Dh1.44-Dh1.68 trillion) for three years and guarantee wholesale bank funding.
"We are in the economic equivalent of a national security crisis, and the challenges are great," Rudd said.
He referred to recent moves by other economies, such as Britain, Germany and Ireland, to extend guarantees or state aid to their banking systems and said Australian banks could be disadvantaged if his government failed to act.
The country's top four lenders are: National Australia Bank, Australia and New Zealand Banking Group, Commonwealth Bank and Westpac Banking Corp.
New Zealand Prime Minister Helen Clark announced her deposit guarantee scheme moments later, though she gave no time frame.
"Our government has agreed to implement a deposit guarantee scheme which will provide New Zealand depositors with additional confidence," Clark told broadcaster TVNZ at the launch of her ruling Labour Part''s campaign for the November 8 election.
Similar footing
The New Zealand scheme charges a guarantee fee of 10 basis points a year for institutions with deposits exceeding NZ$5 billion (Dh10.94 billion).
Both countries said their guarantees should not be taken as a sign of weakness in their banking systems.
Rudd quoted local regulators as saying bank finances remained in good order. "Right now, the balance sheets look great," he told reporters. "Our banks and our financial institutions are in first-class financial order.
"This measure puts our banks on a similar footing to other banking systems around the world.
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