Australia caps bank deposit guarantees

CANBERRA, Australia, Oct. 24 (UPI) -- The Australian government said it would impose a fee for wealthy depositors choosing to switch accounts to banks guaranteed by the government.

Australian Treasurer Wayne Swan said about $21 billion in mortgages and other funds was now frozen by financial firms not covered by the government guarantees, The Sydney Morning Herald reported.

The financial firms without guarantees have had to freeze funds to prevent mass withdrawals as depositors rush to put their funds in guaranteed banks.

The government capped the guarantees at $1 million and said it would impose a fee between 0.7 and 1.5 percentage points for every dollar switched from a non-guaranteed to a guaranteed bank, credit union or building society, the Herald reported.

A limited guarantee has been granted to foreign banks as the government has moved to stabilize the situation that Swan called, "the worst global financial crisis since the Great Depression."

The guarantees were extended to foreign banks with the caveat that Australian taxpayers not be put in a position of protecting their foreign operations, the Herald reported.