This report examines the reasons for the introduction of Australian and New Zealand schemes that guaranteed deposits and liabilities issued by financial institutions. It provides a discussion on the reasons why these schemes were needed. Also, the other objective of this report is to illustrate how the main characteristics of each scheme.
Government introduced schemes that guaranteed deposits and liabilities issued by financial institutions refer to a system which the government introduced to counteract the financial difficulty that their respective country was placed in. These schemes help to promote consumer confidence in the financial system within the country as well as help eliminate the disadvantages the financial institutions may have when competing in a global market.
The main focus of this report is to identify the schemes introduced by both the Australian and New Zealand government. The fall of the US financial market caused by the sub-prime meltdown made the government react as such and the first part of the report will illustrate how both Australia and New Zealand are affected by the US market failure.
In both countries the schemes introduced has intended purposes but as most proposals there are always drawbacks. Drawbacks such as moral hazards derive from such schemes and which in turn results to institutions taking advantage of the current financial situation to further enhance their status or monetary value.
In conclusion, it is widely known that the US sub-prime crisis played a significant role in changing the global financial market. The impact caused the fall in the US economy as the sub-prime meltdown spilled over to global credit markets which in turn affected countries such as Australia and New Zealand. This therefore led to government introduced schemes to minimise the financial difficulties that the country may face.
2.0 Introduction to Australian and New Zealand governments introduced schemes to... [continues]
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