RDP 2001-07: A History of Last-Resort Lending and Other Support for Troubled Financial Institutions in Australia Appendix B: Press Releases Addressing Difficulties at Financial Institutions 1974–1992

Bryan Fitz-Gibbon and Marianne Gizycki

October 2001

Date Troubled institution(s) Statement issuer
2 October 1974 Building societies in
Queensland and South Australia		 Acting Federal Treasurer (Hayden)
…the Reserve Bank has advised the trading banks to consider sympathetically requests for finance that were received by the banks from financial institutions which were responsibly managed and had adequate asset backing. Mr Hayden said that the community could rest assured that the Reserve Bank, as always, would stand behind the banks in regard to their liquidity needs.
3 October 1974 Building societies in
Queensland and South Australia		 Acting Prime Minister (Cairns)
Dr Cairns re-affirmed that it was the policy of the Government to ensure that adequate liquidity was available to enable the banking system to meet the essential needs of business and the community. He said that particularly as regards financial institutions the Reserve Bank was in close touch with the trading banks with a view to ensuring that they were in a position to consider sympathetically requests for finance from them.
28 September 1977 Queensland Permanent
Building Society		 Acting Federal Treasurer (Robinson)
…the Reserve Bank had a continuing understanding with trading banks that they would consider sympathetically the requests for finance received from building societies which were responsibly managed and had adequate asset backing.
5 October 1977 Queensland Permanent
Building Society		 Acting Federal Treasurer (Robinson)
…the Reserve Bank has made it clear to the banks that it stands ready to discuss constructively with them any liquidity problems that may arise from whatever scheme of arrangements might be developed.
13 October 1977 Metropolitan Permanent
Building Society		 Federal Treasurer (Lynch)
…there was absolutely no basis for uncertainty among depositors in operating building societies. Mr Lynch drew attention to the announcement today by the Governor of the Reserve Bank, which had been made after close consultation with the Government, that a very substantial line of credit had been made available to the Commonwealth Trading Bank to back up the liquidity of the Metropolitan Permanent Building Society…He reiterated that in these circumstances there is a continuing arrangement whereby banks stand behind building societies and other financial institutions. The Reserve Bank, in turn, as always stands behind banks in regard to their liquidity needs.
13 October 1977 Metropolitan Building Permanent Society Reserve Bank Governor (Knight)
…arrangements had been made to provide ample support for the largest Queensland building society, the Metropolitan Permanent Building Society. The society's bankers, the Commonwealth Trading Bank, were, with the support of the Reserve Bank, making a very substantial line to credit to the society which will enable the Metropolitan to fully match demands for withdrawals of depositors' funds. This action is a particular instance of the general arrangements by which against the background of the Reserve Bank's support of banking liquidity, banks stand behind financial institution which are responsibly managed and have adequate asset backing.
5 March 1979 St. George Building Society Acting Federal Treasurer (Robinson)
…the Society had very large amounts of liquid resources available to it…the Reserve Bank had a continuing understanding with trading banks that they would consider sympathetically requests for finance received from building societies which were responsibly managed and had adequate asset backing.
14 May 1979 The Bank of Adelaide Reserve Bank Governor (Knight)
The Governor of the Reserve Bank of Australia, Mr HM Knight, confirmed today the provision by the Reserve Bank of a liquidity facility to The Bank of Adelaide. This was one of several actions that had been taken in respect of The Bank of Adelaide group as announced by the Chairman of that Bank and the Chairman of the Australian Bankers' Association. The arrangements were made in consultation with the Reserve Bank and with its full concurrence…The facilities now available to the Bank of Adelaide ensured that it remains in a position to meet fully its commitments.
30 October 1987 Challenge Bank Reserve Bank Governor (Johnston)
Mr RA Johnston, today scotched rumours in the Western Australian media concerning the stability of Challenge Bank Limited. He said that in any case the Reserve Bank stood squarely behind the Challenge Bank.
13 February 1990 Farrow Corporation Victorian Treasurer (Jolly) and Victorian Attorney-General (McCutcheon)
…depositors' funds in the Pyramid Building Society are secure… rumours circulating about the Society are without foundation…The Minsters said Pyramid has extensive lines of credit into the banking system, and is supported by leading national banks. The Treasurer has been assured that adequate liquidity support will be available under these arrangements. The Reserve Bank has a long standing understanding with banks that they will consider sympathetically requests for finance received from building societies which are responsibly managed and have adequate asset backing…the Treasurer has been given a written statement by the independent auditors of the Pyramid Building Society that, in their view, there is ‘absolutely no reason to be concerned that depositors' money is at risk’.
2 July 1990 Farrow Corporation Reserve Bank Governor (Fraser)
The Reserve Bank is not responsible for supervising building societies or for protecting their depositors. It is, however, charged with upholding the stability and integrity of the financial system as a whole. The Bank therefore has been monitoring closely developments in relation to building societies following the decision by the Victorian Government last week to put the Farrow Corporation…under official administration…From its enquiries, the Bank believes that the problems of the Farrow group are not shared by other societies in Victoria (or any other State for that matter)…The Bank has participated in the discussions leading to the arrangements agreed by the Victorian Government with representatives of the major banks and the Victorian Building Societies Association…Under these arrangements the banks will assist the building societies in maintaining liquidity. For its part, the Bank will provide any necessary liquidity support to the banks involved…The Reserve Bank believes that these arrangements will fully protect the depositors in the societies concerned.
16 July 1990 Bank of Melbourne Reserve Bank Governor (Fraser)
…Mr Bernie Fraser, today scotched rumours concerning the stability of the Bank of Melbourne…the Reserve Bank will ensure that Bank of Melbourne has adequate liquidity and that its depositors are fully protected.
3 October 1990 Metway Bank Reserve Bank Governor (Fraser)
Metway Bank is a sound bank and rumours concerning its stability have no substance. Depositors in any event are protected by the Reserve Bank of Australia…depositors could be assured that the Reserve Bank would take whatever steps were necessary to ensure that Metway Bank Limited had adequate liquidity and that its depositors were fully protected.
6 January 1992 R&I Bank of Western Australia Reserve Bank Governor (Fraser)
…rumours which had been circulating concerning the viability of the R&I Bank of Western Australia were totally lacking in substance…Deposits with the R&I are guaranteed by the State Government of Western Australia…depositors could also be assured the Reserve Bank would take whatever steps were necessary to ensure that R&I had adequate liquidity.