SYDNEY, Australia?Australia said on Sunday it will withdraw its bank funding guarantee due to improved conditions, ending a scheme put in place at the height of the global financial crisis.

Treasurer Wayne Swan said the Council of Financial Regulators had recommended ending the measure which he said had been vital in stabilizing Australia's banking system "when others were collapsing across the globe."

"It gave our banks continued access to global capital markets on competitive terms, which has been critical in supporting the flow of credit through the Australian economy," he said.

Under the scheme, first announced on October 12, 2008, the government guaranteed the wholesale debt obligations of Australian banks if the financial institutions paid a fee.

Swan said the Guarantee, which will be withdrawn on March 31, had helped support competition in the banking sector during the global financial crisis, which hit smaller lenders particularly hard.

"Without the Guarantee, our banks would have lent less and interest rates for borrowers would have been higher, leading to lower growth and higher unemployment," he said in a statement.

"It has offered wholesale funding certainty to more than 150 Australian Authorized Deposit-taking Institutions, including regional banks, building societies and credit unions.

"The Guarantee has allowed non-major Australian banks to raise over 32 billion dollars (27.6 billion US) in funding from international credit markets."

The Council of Financial Regulators?which includes the heads of the central bank and Treasury?had advised that bank funding conditions had improved to the extent that the guarantee was no longer needed, Swan said.

"Importantly, our regulators explicitly advise that removing the Guarantee will not materially affect banking sector funding costs," he said.

"The Council also advises that it is appropriate we withdraw our Guarantee due to the greater strength of our financial system compared to key G20 countries which have already removed their guarantee or will do so shortly."

The announcement does not affect the government's guarantee of bank deposits of less than one million dollars, which extends to at least October 2011.