change to financial claims scheme a vote of confidence in Australia's banking system
bankmecu has welcomed yesterday’s announcement of a permanent deposit guarantee under the Financial Claims Scheme.
Abacus – Australian Mutuals, the industry body for mutual banking groups, noted the Government’s confirmation of the “almost unparalleled” strength of credit unions, building societies and banks and their strong practices of responsible lending and risk management.
“Today’s announcement is a vote of confidence in the strength and stability of Australia’s banking institutions, including mutuals,” said Louise Petschler, Abacus CEO.
“The Government and regulators have made a clear statement that credit unions, building societies and banks are in great shape,” said Ms Petschler.
The new permanent cap of $250,000 will apply from February 2012 to depositors in all of Australia’s regulated banking institutions: credit unions, building societies and banks. The current cap of $1 million has been under review since May 2011.
“The Financial Claims Scheme was established with a $1 million cap at the height of the global financial crisis. The Scheme has never been used – a testament to the regulatory system in Australia and the way our banking institutions are run in this country.
Abacus noted that the high original cap was a response to the widespread uncertainty of late 2008 when the US and European banking systems were in crisis. In contrast, Australia’s banking sector – including mutuals – remained robust and strong.
“The real protection for all depositors, big or small, is our world class regulatory framework policed by APRA. This subjects all banks, building societies and credit unions to the same standards on capital, liquidity, risk-management and governance,” said Ms Petschler.
“Australia has the strongest customer owned banking sector in the world. We are highly capitalised, and deliver a highly competitive option that is attracting many new members. We are setting a standard that other countries can only aspire to,” said Ms Petschler.
With the certainty delivered by today’s announcement, Australian mutuals have urged Government and regulators to focus squarely on increasing competition in retail banking.
“Customer owned banking delivers value to millions of Australians. Mutuals deliver because we exist only to serve our customers, and to offer ethical, competitive banking services.
“We’ll be working to deliver more choice and competition to Australian consumers. We want as many Australians as possible to experience the better value that comes from banking with a mutual – a credit union, building society or mutual bank,” said Ms Petschler.
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.
what is the Financial Claims Scheme (the deposit guarantee)?
All banks, building societies and credit unions inAustraliameet exceptional high standards and rules set by the Australian Prudential Regulation Authority (APRA). APRA also administers the Financial Claims Scheme, which is an additional protection for deposits.
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.
why has the Financial Claims Scheme cap changed?
The initial $1 million cap for the Financial Claims Scheme was an emergency response to the global financial crisis. It was introduced in 2008 for three years.
Australia has the strongest banking sector in the world and the Government has decided this emergency response is no longer required, given our system’s clear strength.
The new cap brings Australia into line with similar guarantee schemes overseas.
how does this affect my deposits?
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.
There are transitional arrangements in place for all term deposits made prior to 10th September, and new deposits between 10th September and 1 February 2012.
|my deposit with bankmecu ||what Financial Claims Scheme cap applies? |
|Deposits maturing before February 2012 (including all new deposits made after 10th September 2011 with this maturity).
||$1M guarantee until maturity. If the deposit is rolled over, the $1M cap applies until 1 February 2012. The $250,000 cap then applies.
|Deposits (in place on 10/9/2011) maturing between 1 February & 31 December 2012.
||$1M guarantee applies until maturity. If the deposit rolled over, the $250,000 cap will apply from the roll-over date.
|Deposits (in place 10/9/2011) that mature after 31 December 2012.
||$1M guarantee applies until 31 December 2012. The $250,000 cap then applies.
|All new deposits made on or after 1 February 2012.
||The $250,000 guarantee applies.
strict Australian regulation protects your deposits with bankmecu
bankmecu meets the same strict standards as the major banks, under the Banking Act with strict oversight by APRA. APRA’s rules on safety and capital apply to all banks, building societies and credit unions to the same high standards.
We are owned by our customers. Our focus is on your interests, and we are conservative and careful managers of our members’ money.
Mutuals have the highest level of capital in the banking system providing exceptional stability. Collectively, mutuals have combined assets over $80 billion, and over 4.5 million Australians bank with a mutual.
To find out more about mutual banking, visit the Abacus website at www.abacus.org.au.
To find out more about Government guarantees, visit APRA’s website at www.apra.gov.au.
View the Treasurer's announcement here.