Government Deposit Guarantee

The Government has announced a change to the cap under the Financial Claims Scheme – the scheme that guarantees depositors in all Australian banking organizations - credit unions, building societies and banks - in the highly unlikely event of a banking institution going out of business.

When the GFC hit in 2008 and governments around the world announced guarantees to support their system, the Australian Government announced that it would guarantee deposits in banks, building societies in credit unions up to $1 million per person per institution – in part, to stop our banking system being disadvantaged compared to others.

Following a review of the FCS and on the recommendation of the Reserve Bank, APRA, ASIC and Federal treasury, this cap has now been reduced to $250,000 per person per banking institution. The Government has also made the guarantee permanent.

The Scheme applies in exactly the same way to all credit unions, building societies and banks. From 1 February 2012, deposits will benefit from the $250,000 guarantee.

How are deposits at Australian credit unions, building societies and banks protected?

Australia has one of the strongest banking systems in the world. You can have confidence that all Australian banking institutions – credit unions, banks and building societies –must meet the toughest regulatory standards and protections, designed to protect you. The Financial Claims Scheme has never been used in Australia.

What is the Financial Claims Scheme (the deposit guarantee)?

The Financial Claims Scheme ensures that depositors with credit unions, banks, and building societies will be guaranteed repayment of their funds in the extremely unlikely event that any banking institution faces stress. The Scheme includes a guarantee of $250,000 per person per institution. Existing deposits in place at 10th September 2011 have a continuing $1 million guarantee until December 2012.

If you have an existing deposit – how will the cap apply?

Term deposits that existed at 10 September 2011 will continue to be guaranteed up to $1 million until the earlier of:

The date of maturity of the term deposit;
31 December 2012.

If a term deposit that was existing at 10 September 2011 is rolled over before 1 February 2012, then the deposit will be guaranteed as follows:

Up to 1 February 2012 - $1 million
From 1 February 2012 - $250,000

If a term deposit existing at 10 September 2011 matures between 1 February and 31 December 2012, the cap will apply to the deposit as follows:

Up to maturity - $1 million;

If rolled over post 1 February - $250,000 from roll-over date.

All other deposits, and term deposits made after 10 September, are covered as
follows:

Up to 1 February 2012 - $1 million
From 1 February 2012 - $250,000

To find out more about Government guarantees, visit APRA’s website at www.apra.gov.au