Support given to Adelaide Bank

Press, 16 May 1979, Page 18

Support given to Adelaide Bank

NZPA Melbourne The Reserve Bank of Australia, and the major Australian trading banks have origanised a S6OM rescue of the Bank of Adelaide, Ltd. The historic move, made i in consultation with the Federal Treasurer (Mr John Howard) and the Reserve I Bank, was caused by the ißank of Adelaide’s problem with its finance subsidary, I Finance Corporation of Australia, Ltd. This is the first time that the Australian banks have openly provided support for a member. The trading banks will provide a SSOM subordinated

Joan facility to the Bank of Adelaide, and the bank initially will draw-down S3OM of this. The purpose of all the arrangements was to allow F.C.A. to remain solvent under its trust deed. The alternative to this would be receivership. The Reserve Bank will provide the Bank of Adelaide a borrowing-facility of SIOM, and the major trading banks will “provide assistance” with F.C.A.’s management. The Bank of Adelaide said that it was holding talks with another bank aimed at a merger, and a further announcement should be made in the next few days. The talks are believed to be with the Bank of New South Wales, Ltd, and at the suggestion of the Reserve Bank. The banks have advised the Bank of Adelaide to write-doWn its F.C.A. investment by SSBM. The Bank of Adelaide’s chairman (Sir Arthur Rymill) said that the bank, and I F.C.A., had approached the I

other trading banks “against the background of some public questioning of F.C.A.” With help from the South Australian Government, they had asked the trading banks to make loans, and take up sufficient preference capital, paid to 10c a 100 c share in F.C.A. to replace any writeoff, he said. “The trading banks, while expressing their willingness to help the Bank of Adelaide itself, indicated that, as a result of the investigation made by their working group, they were not prepared to give direct support to F.C.A.,” he-said. The working group had recommended provisions of S3OM against the group’s real estate assets. It had further recommended a S2BM contingencies provision.