Banks may have to meet prescribed lending targets 04 March 2009 5:39PM Ian Rogers Australia's government will support the purchase, by governments, of the "toxic assets" from banks, as the cornerstone of the resolution of the global financial crisis.In the lead up to a summit of political leaders and finance ministers in London next month under the banner of the group of 20 policy proposals Kevin Rudd, the Prime Minister, said in a speech in Sydney yesterday that "all toxic assets on bank balance sheets must be neutralised. "This can be achieved by creating a publicly owned asset management company as the Republican Administration did in the United States in the 1980s to deal with the savings and loan crisis; or publicly-funded insurance mechanisms; or other effective mechanisms deploying public and private capital to ring-fence and then remove toxic assets."Rudd said this needs to be done "quickly and comprehensively, and may require compulsion." He did not mention whether the Australian government planned to fund any toxic assets, of which some scraps linger on the books of National Australia Bank and ANZ.He did say that "the price of bad assets should be derived from a transparent and simple formula", though finding this formula remains a contentious subject.Looking forward Rudd said that "once adequately capitalised, banks must formally agree to maintain regulated levels of lending in return for government support through sovereign guarantees on deposits and/or interbank lending. "This set of principles must apply to all globally, systemically significant banks with toxic asset problems today."In theory rules of this type already apply in Britain, though not in practice.Rudd also did not say whether Australia's banks met the definition of "globally, systemically significant banks with toxic asset problems today", but probably not, given the qualification on the toxic assets.On the other hand Australia's banks have already proved an adjunct to welfare initiatives in recent weeks in the context of relief from the Victorian bushfires.