Australia govt says to amend bank deposit guarantee

CANBERRA, Oct 22 (Reuters) - Australia's government will amend its A$700 billion ($493 billion) guarantee on bank deposits to help staunch a flood of redemptions threatening cash trusts and mortgage funds amid the global financial turmoil, Treasurer Wayne Swan said on Wednesday.

Swan said he was looking at changes requiring holders with "somewhere north" of A$1 million in accounts to pay an insurance-style premium for the taxpayer-backed guarantee, though he refused to speculate on the kick-in amount.

"It will be done in a thorough, measured and considered way," Swan told Australian radio. "What our regulators are doing is settling all those details and consulting with industry," he said.

Prime Minister Kevin Rudd this month announced the centre-left Labor government would guarantee the country's entire deposit base in a bid to shore-up confidence amid the global credit turmoil buffeting the economy.

But the move has seen a rush of cash out of mortgage funds and other funds not covered by the guarantee.

Australian media reported on Tuesday that the heads of several Australian investment banks had written to the government last Friday warning that the hastily-prepared scheme was damaging their ability to lend to the corporate and mortgage market.

Challenger Finanical's (CGF.AX) Challenger Howard Mortgage Fund, Australia's biggest mortgage fund, on Tuesday froze withdrawals after the deposit guarantee sparked a flood of redemptions.

The Australian paper reported on Wednesday that three more mortgage funds, holding a combined A$660 million, had frozen redemptions, adding pressure on the government to widen its deposit guarantee.

Cash management trust representatives will meet again with senior government members in Canberra on Wednesday to discuss widening the guarantee scheme to cover more than bank deposits.

Rudd said on Tuesday that changes to the scheme were likely after accusations that Australia's independent central bank was not consulted prior to it being announced 10 days ago.

Australia's top treasury official, Treasury Department Secretary Ken Henry, will be quizzed by parliament later on Wednesday about whether the Reserve Bank of Australia had concerns about an unlimited guarantee on bank deposits. ($1=A$1.42) (Reporting by Rob Taylor; Editing by James Thornhill)