As the debt crisis worsens and banks struggle to meet their own capitalisation targets, SBC is being asked to help fund the Government’s plan to increase the size of the banking sector by more than $1 trillion.
“Our debt burden is going to increase, and it’s going to become more and more expensive for the banks to keep borrowing,” SBC chief executive Andrew Gwynne said last week.
“That is why we have been looking at this, and the reason why we’re doing it now is we want to keep our banks safe.”
The Government’s borrowing strategy has already seen the bank buy a number of small businesses in the US and China.
The bank’s share price fell nearly 6 per cent on the news.
“We are seeing a lot of demand for our product, and so our share price has increased significantly,” Mr Gwynnes said.
The Australian government has been trying to raise $1tn in debt through a series of targeted bank bailouts. “
And there are many different markets in China that have seen demand for SBC, so we see demand coming from that market as well.”
The Australian government has been trying to raise $1tn in debt through a series of targeted bank bailouts.
This week, the Federal Government said it was also looking to increase SBC’s capitalisation by $2.4bn over the next two years.
This means SBC would have to borrow $2bn more.
The Government is asking the Australian government to provide $1bn in loan guarantees for small businesses to help them pay for their loans.
“The Government has committed to increasing its capitalisation over the coming financial year from $4.6tn to $5.4tn, including a $1 billion capital injection from the Federal Reserve,” the Government said.
The Reserve said it would also “provide an additional $1 to $1,000 per household in capital relief to small businesses over the course of this financial year”.
The Government has also been making its case for the funding through the introduction of a new credit card company called Fidelity Australia.
The company was established in 2014 to help Australian businesses finance their infrastructure needs.
Fidelity says it is already lending more than the $2 billion it has already secured from the Government.
It said it has a “substantial number of existing and prospective customers” in Australia.
“Fidelity will invest $1billion to create an Australian-owned credit card service, and will work closely with the Government and the Australian Banking Group to develop a framework for this initiative,” it said in a statement.
“This includes a strategic plan and a detailed strategy for the company to be rolled out across the country over the life of the scheme.”
The new Fidelity card, which has already been rolled out in Australia, will allow people to buy and use credit cards without a bank account.
The Australian Government is also pushing for the creation of a “digital dividend fund” to invest in the commercial banking sector.
In addition, the Government wants to create a new private banking licence for Australian companies that have been granted the ability to invest outside of the traditional banking sector, such as through equity, debt and other investments.
Businesses that wish to invest will have to apply for the licence, which will only be available to small business operators.
The new private finance initiative is one of many Government plans aimed at tackling the debt crises in Australia and around the world.
Earlier this year, the Australian Federal Government announced a $5 billion loan guarantee for the US banking sector to help finance a range of economic initiatives.