Banks look likely to fund their half share of the $4 billion "capital" base for the proposed Australian Business Investment Partnership by making loans to the special purpose fund, rather than investing actual capital.
The Herald Sun reported that Commonwealth Bank, ANZ and Westpac each confirmed they were treating their respective $500 million commitments to the fund as loan facilities rather than capital.
The funding vehicle proposed by banks and the Australian government will provide a backstop to select commercial property developers. The fund is intended to provide an alternative source of finance to cater to an anticipated reduction in foreign bank lending over the course of this year and next year.
The proposal, which is still being worked out in detail, will allow the fund to sell up to $26 billion in government guaranteed bonds.
Negotiations between banks and the government over the scheme are likely to drag on to mid March, the Financial Review reported today.
The AFR also published highlights of a discussion paper on the proposed fund prepared in December by National Australia Bank. At that time NAB envisaged capital contributions of $1 billion from each bank as well as from the government, but with the government guaranteeing the capital of each bank. The government rejected this element.