Brandon Khoo, APRA Executive Manager, Specialised Institutions Division addressed the specific issues of the government deposit guarantee and liquidity as well as considering the industry generally and possible fine tuning of Basel II in relation to capital requirements.

He addressed liquidity management in the context of securitisation and the competition for retail deposits and the need for ADI’s to review their business models.

He emphasised the need for ADI strategies to be aligned with the new market realities which meant lower levels of growth.

He said ADI’s needed to focus on:

• impaired loans;
• investment quality;
• interest rate risk;
• managing their margins and profitability.

He warned that the government guarantee helped give confidence against a run on funds but it was not a guarantee against failure.

He also warned that the government RMBS purchase program was a "one-off".

The next 3 years should be used by mutuals to get stronger.