Second-tier lenders wary of guarantee change

The removal of the government guarantee on wholesale funding could trigger a new phase of competitive disparities in the banking sector, punishing regional banks that expanded their lending during the financial crisis.

The Bank of Queensland is stepping up its lobbying of Canberra to ensure smaller banks that grew their balance sheets during the crisis are not disadvantaged by the leveling of the fee structure of the guarantee, reported The Australian Financial Review.

Lower rated banks have argued for the removal of the premium charged between borrowers on the scheme.

But BoQ chief financial officer Ram Kangatharan urged the government to go one step further and level the insurance charge for past borrowings. 

He said that not giving the same relief to the banks that have continued funding mortgages through the crisis would place an unfair burden on them.

"It advantages those institutions that cut back lending, which is against the government's policy objective," he said.

Other institutions that have raised guaranteed debt are Suncorp, ME Bank and ING Australia.

Related Story 

Regionals raise $2.1bn - Regional lenders Bank of Queensland and Bendigo and Adelaide Bank have raised a total of $2.1bn of new funding in separate deals.