16 Apr 2009

Bank for local authorities proposed

9:06 am on 16 April 2009

The backers of a proposed bank that would issue debt on behalf of local authorities say it could end up saving ratepayers millions of dollars a year.

The idea, being scrutinised by Treasury and Reserve Bank officials, came from the Government's job summit in February.

Rob Cameron of investment bank Cameron & Co, who headed one of the summit's sub-groups, says the bond bank would pool debt from councils around the country, which could cut between one percentage point and 2.5 percentage points from councils' borrowing costs.

Mr Cameron says Government assistance may be needed in the bank's early stages, but is not sure yet what form this could take.

He says at least one financial institution has expressed an interest in being involved. This could take the form of ownership or administration of the bank or both.

Brook Asset Management managing director Mark Brighouse says a bond bank would assist smaller councils struggling to raise debt. He does not believe it would need to be covered by the Government's funding guarantees in its early stages.