Government Deposit Guarantee
Invest with Confidence
The Government Deposit Guarantee Explained
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, designed to protect you.
All banks, building societies and credit unions in Australia meet the standards and rules set by the Australian Prudential Regulation Authority (APRA). APRA also administers the Financial Claims Scheme (Government Deposit Guarantee), which is an additional protection for deposits.
What is the Government deposit guarantee?
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.
The Government has decided this emergency response is no longer required, given our system’s clear strength, and has reduced the amount of the cap to $250,000. The new cap brings Australia into line with similar guarantee schemes overseas.
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 an Australian credit union, bank or building society |
What Financial Claims Scheme cap applies |
| Deposits maturing before February 2012 (including all new deposits made after 10 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. |
What sort of depositors are covered?
The guarantee applies to all deposits held by legal entities, including individuals, partnerships, companies, trusts and government entities regardless of where the depositor resides or is based.
What if I have more than one account?
The guarantee threshold applies to the combined value of deposit accounts you hold with a particular institution.
What about joint accounts?
For the purposes of calculating a depositor's total amount of deposits with a particular institution, the value of a joint account is split equally between the account holders.
Therefore, a joint account in two names with a value of $250,000 would be split equally into $125,000 entitlements between the account holders for the purposes of determining a depositor's total value of deposits.
What if I have more than $250,000 invested with one institution?
The first $250,000 of your funds will be guaranteed at no cost under the scheme. Amounts over $250,000 are not guaranteed by the Australian Government.
Will my funds over $250,000 still be secure if I deposit them with the Greater Building Society?
Yes. The Greater meets the same strict, legally enforceable standards as banks, under the Banking Act and strict oversight by the Australian Prudential Regulation Authority (APRA) and continues to have an investment grade BBB rating from Standard & Poors.
Even prior to the design of the Government Deposit Guarantee Scheme the Australian Government, via regulatory agencies such as APRA, already had strict measures in place to help prevent the unlikely event that a financial institution faces stress or fails.
APRA's regulatory regime is designed to ensure that depositors do not lose money and their strict rules on safety and capital will continue to apply to all banks, building societies and credit unions to the same high standards in place prior to the Deposit Guarantee Scheme.
What are some examples of these strict measures?
APRA requires that all financial institutions meet minimum levels of Liquidity and Capital.
In simple terms, as the Greater operates as a mutual, the vast majority of its capital is held in the form of retained earnings (after-tax profits). Capital acts as a buffer to absorb any unanticipated losses and enables the Society to continue operating while any unforseen problem is being addressed, and still honour it's obligations to depositors and creditors.
As at June 2011, the Greater's capital levels were nearly double the minimum required by APRA.
Similarly to capital, APRA requires that the Greater must hold minimum liquid assets (i.e. cash, or readily convertible to cash) to ensure we can meet our payment obligations (particularly those to our depositors) when they fall due.
As at June 2011, the Greater's liquid assets were well in excess of the minimum required by APRA.
How have current global economic conditions affected the Greater?
The turmoil in international financial markets has largely stemmed from losses suffered by international lenders engaging in "sub-prime" lending. It involved lending funds to borrowers without due diligence being fully conducted into their ability to repay the debt.
Whilst the Greater is not completely immune to the extraordinary volatility of the markets, it has never engaged in "low doc", "no doc" or "sub prime" lending and continues to have very low loan default rates in comparison to industry averages.
