Government invests $15bn in smaller lenders

by Madison Utley20 Mar 2020

The government yesterday announced an investment of up to $15bn towards ensuring smaller lenders are able to continue supporting Australian consumers and small businesses, as the spread of coronavirus compromises lenders’ access to affordable credit.

The Australian Office of Financial Management (AOFM) will be provided with an investment capacity of $15bn to invest in wholesale funding markets used by both small ADIs and non-bank lenders, which should provide support for a substantial volume of expected issuance by these lenders over a 12-month period.

In announcing the investment, the government reiterated that small lenders are critical to the country’s lending markets, and are integral in “driving innovation and providing competition” for larger lenders.

The government’s funding complements the Reserve Bank of Australia’s (RBA) announcement of a $90bn term funding facility for ADIs which will also provide support for SMEs through protecting their access to cheap funding.

Both initiatives look to establish and maintain lenders' ability to support their customers and the Australian economy.

The assets being purchased by the AOFM will not be limited to residential mortgage backed securities, but will include a range of other asset backed securities and warehouse facilities; the government plans to provide the AOFM with investment guidelines outlining the basis on which the body is to undertake these investments.

The relevant legislation will be introduced next week, with the AOFM expected to be able to begin investing by April.