Oct. 12 (Bloomberg) -- Australia’s lower house passed legislation today allowing the nation’s financial companies to sell covered bonds, a move the Treasury estimates may lead to A$130 billion ($129 billion) of sales.
The legislation, introduced to parliament last month by Australian Treasurer Wayne Swan, will amend the nation’s Banking Act to allow domestic lenders to sell the debt for the first time. It now depends on a vote in the upper house Senate to become law.
“This represents an important new source of funding for our financial system, particularly while global capital markets are so volatile,” Swan’s office said today in an e-mailed statement confirming the House of Representatives vote.
While offshore banks have been allowed to sell covered notes in Australia, the ban meant domestic lenders were unable to access cheaper funding in a nation with the highest interest rates in the developed world. Covered bonds, which typically have the highest credit rating, are backed by assets that stay on the bank’s balance sheet and can be sold in a default.
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