The Australian Financial Services Association (AFSA) is calling for the closure of some banks, including State College Bank and ANZ Bank, as the fallout from the Queensland floods continues.
In a report on Tuesday, the AFSA said the state’s banks had faced an “immediate and severe financial and operational stress”.
“This has resulted in significant pressure on the banking system,” the report said.
“As a result of the state of affairs, the banks have experienced increased volatility in their lending activity and a significant decrease in their capital requirements.”
The banks have also been unable to get credit lines and other financial support from the Australian Prudential Regulation Authority (APRA).
“The APRA has not been able to offer banks a loan guarantee for up to 30 days, which is a significant constraint on the banks’ ability to meet their lending obligations,” the AFA report said, noting that “many of the banks had had to seek external funding, as they were unable to access external funding”.
The APRA said it was working with the State Bank of Queensland to determine the extent to which the banks were impacted by the floods.
The AFA said the APRA had provided “substantial assistance” to the banks during the crisis, but that it was too soon to draw any conclusions.
“The banks have been unable or unwilling to provide adequate liquidity and support to support the banks in their efforts to maintain business and access credit lines,” the agency said.
While some banks have taken advantage of the “short-term” nature of the financial crisis, it said the banks should be prepared to take further steps to help the community in the event of further financial hardship.
“Banks will need to consider the impact of the current economic environment on the financial services sector, including the impact on their financial and lending operations, on their ability to service their clients, on the ability of the Australian banking system to provide them with support in the future, and on the impact that this may have on the business of the institutions they provide financial services to,” the FASA said.
The government has promised $1.3 billion in assistance to the state, and has set aside $300 million to assist the banks.
The Federal Government announced on Tuesday that it would be providing $1 million over four years to help banks recover from the floods, which have affected thousands of properties across the state.
Federal Treasurer Scott Morrison said the money would be used to “help banks with their financial recovery”.
The Government has said it would provide $1 billion in aid to the State College and ANU schools affected by the flood, and is working with local authorities and other agencies to assist affected residents.
In his statement, Mr Morrison said it had been “extremely difficult to assess the full impact of these floods on the state and local communities”.
“While this assistance is certainly not enough to meet the needs of all of the affected people, it is a step in the right direction in terms of helping the affected families recover and regain the trust of their community,” Mr Morrison told reporters.