A foreign exchange exchange company that collapsed and went into receivership in the US last year is being used as a case study for how the government can use the Troubled Asset Relief Program (TARP) to help firms when they become too big to be bailed out.

A spokesman for the Australian Securities and Investments Commission said in a statement that the company was one of several “too big for money” funds being used to assist overseas financial institutions, including foreign banks and investment funds.

In March last year, the Commonwealth Bank collapsed after the Federal Reserve announced it would cut its funding by more than $3.4 trillion, and the Treasury was forced to intervene by pledging the entire $3 trillion to Australian banks.

The government’s TARP program was supposed to help Australian banks that were at risk of being “too large to fail” if they went under, but it has also been used to help foreign banks with their exposure to US companies.

Australian government spokesman Mark Binskin said the Australian Government was “currently in discussions with the US Treasury on an arrangement” that would “allow a similar program to be used in Australia”.

The bank’s assets were valued at $4.5 billion, and some of the fund’s money was used to cover losses from the bank’s purchase of a toxic mortgage lender, according to the government.

“This fund will be used to support the financial stability of overseas banks and fund their exposure on the US market,” Mr Binskins said.

While the fund is a part of the TARP, it is not part of Treasury’s asset-backed securities (ABS), which the Government is required to maintain to ensure it remains solvent.

Treasury has yet to comment on whether it plans to use the fund for the purchase of toxic mortgage lenders.

It is also unclear how the Australian taxpayer will be involved in this process, with Mr Boutskin saying he was not “prepared to comment” on that.

There is also no indication when the fund might be used.

As the government’s Troubled Assets Relief Program is still being debated, it remains unclear what will happen to the funds when they are used.