ABIP premium 300 bps

The interest premium that the Australian Business Investment Partnership plans to charge on commercial property loans may be as much as 300 basis points above comparable bank interest rates, the Sydney Morning Herald reported, citing evidence from the interim ABIP director, Ahmed Fahour, at a Senate committee hearing yesterday.

The Senate is considering whether to pass the government's bill to set up ABIP, which is intended to provide a backstop to foreign banks that refuse to refinance existing commercial property loans or to help fund any significant new projects.

Fahour told the committee that ABIP will not push foreign lenders from the market.

The Australian government plans to contribute $2 billion in capital to ABIP while the four major banks will contribute $500 billion each and the fund will be able to borrow up to $26 billion.

The debate continues over the need. A selection of CEOs of the more prominent foreign banks, in interviews quoted in the Financial Review today, once again brush off the notion that there is any withdrawal of foreign bank funding from Australia.

While some acknowledge more caution toward providing credit, others characterise issues in the bank funding market as those of demand and not supply.

APRA data indicates that foreign banks, in aggregate, have continued to grow their balance sheets in Australia.