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Should banks do more to keep credit flowing?

The federal government has been helping out Aussie banks to ensure they don’t get credit crunched as badly as their overseas counterparts. But are our banks keeping up their part of the bargain and providing enough credit to cash-strapped local businesses?

Treasurer Wayne Swan has told ABC that banks have “an obligation to ensure there is a sufficient flow of credit in the economy to viable business.”

Are the banks playing a fair game, or acting too tough? Last month CBA gave investment company Storm Financial just one day to repay debts said to total more than $78m. And look what happened to Storm.

Isn’t it time that the banks started lending more money to support Aussie businesses, rather than just taking it from the taxpayer? Get the credit flowing below.

Comments (5)

  1. Could the government please provide more details on what it thinks is a viable business? It’s up to the banks to decide this and in the current market, it’s not surprising that they aren’t as keen to lend. Ever heard of the global credit crunch?!

  2. Storm deserved to fail – it wasn’t “viable”. Banks are not charities – they must assess credit on a case-by-case basis.

  3. The situation here is not as extreme (thank god) as in the US and UK where the government actually owns big stakes in major banks. In Australia the govt’s control is more limited.

  4. It isn’t just a matter of assessing credit worthiness, the Basel II regime requires banks to set aside more capital for existing/new loans as the credit quality (or credit rating) deteriorates. As such in the downturn we are experiencing, as firms release revised accounts that show a worse credit profile this chews up lending banks’ existing capital base and therefore their lending capacity.

  5. Banks are for-profit organisations, of course. They are however the largest credit providing institutions in most developed countries. Since a country, and indeed a society is not wholly and solely about maximising $ profits, and banks are a part of our society, they have a responsibility to society – not just shareholders.
    Besides, increasing credit flow, to borrowers with the capacity to repay, will stimulate the economy and create a greater demand for bank services and will ultimately help banks’ bottom lines (unless of course they are hoping for a big depression during which they can snap up some bargains with the cash they are hoarding).

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