The Government Guarantee Scheme for deposits and wholesale funding is due to expire in October 2011 and there is already debate about how the scheme will be wound down.

The joint submission from the RBA and APRA to the Senate Economics References Committee Inquiry into Bank Funding Guarantees contains some interesting data on the reasons for and the effect of the government guarantee:

• 104 CUBS (or other ADI’s) out of a total of 136 have obtained a certificate for deposits over $1M;
• 1 has a certificate for short term wholesale funding and 1 has a certificate for term funding;
• “Liaison with ADIs suggests that most depositors with over $1 million are not seeking the guarantee when they have to pay for it. The major exception is depositors with very conservative mandates, such as trustees and councils. “

The submission does not discuss the cost differential of the guarantee between banks and CUBS, although it does observe that “(g)iven the changes that have taken place elsewhere, the pricing of the Australian guarantee for long-term debt now looks relatively low for AA rated banks”.