Government Guarantee - FAQ
Is ME Bank covered by the guarantee?
How much is covered by the guarantee?
How will the new cap apply to term deposits?
What will happen when the cap is reduced?
What deposit products are covered?
What is the Government Guarantee? (It may also be referred to as the Financial Claims Scheme or the last part of the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding still functioning.)
The Government Guarantee was established by the Federal Government in October 2008 as an emergency measure to protect customers with deposits of up to $1 million from loss in banks, building societies and credit unions in the event of financial collapse.
A number of international banks were failing at the time and the Government Guarantee offered comfort to Australians who were largely unaffected by the financial crisis.
Is ME Bank covered by the guarantee?
Yes. Deposits held with ME Bank are covered by the Government Guarantee.
How much is covered by the guarantee?
Currently the Government Guarantee is capped at $1 million per person per financial institution.
However, the Government has recently announced that the cap will be reduced to $250,000 per person per financial institution from 1 February 2012, with some exceptions for term deposit accounts.
How will the new cap apply to term deposits?
From what is contained in the Treasurer's announcement it seems that:
- existing term deposits as at 10 September 2011 that mature or roll over before 31 January 2012 will be covered by the $1 million guarantee until 31 December 2012 or until they mature/roll over (whichever happens earlier);
- term deposits opened or rolled over between 11 September 2011 and 31 January 2012 will be covered by the $1 million guarantee until 31 January 2012. On 1 February 2012, the guarantee will reduce to the $250,000 cap;
- term deposits opened or rolled over on or after 1 February 2012 will be covered by the $250,000 cap.
However, until the proposed changes to the cap are made law, we can't say for sure that this is how the new cap will apply to term deposits.
Examples of how the new cap is intended to apply to term deposits
Example 1
Fred opened a 2 year term deposit on 1 September 2011 and deposited $1,000,000 into the account. The term deposit matures on 30 August 2013.
The Government Guarantee protects the $1,000,000 deposited until 31 December 2012. From 1 January 2013, only $250,000 is protected by the Government Guarantee.
Example 2
Julie opened a 1 year term deposit on 20 September 2011 and deposited $750,000 into the account. The term deposit matures on 19 September 2012.
The Government Guarantee protects the $750,000 deposited until 31 January 2012. From 1 February 2012, only $250,000 is protected by the Government Guarantee.
What will happen when the cap is reduced?
The Government will reduce the deposits guarantee for Australian banks, building societies, credit unions or foreign bank subsidiaries.
However, it will be business as usual for Australia's banks, which are heavily regulated by the Australian Prudential Regulatory Authority.
Will my deposit be secure?
Of course. ME Bank, which is owned 32 Australian industry superannuation funds, which have $180 billion of funds under management, was financially sound and profitable before the Government Guarantee and remains so today.
What deposit products are covered?
The Government Guarantee on deposits currently applies to the following ME Bank products:
- InterestME Savings Account
- Online Savings Account
- Term Deposits
- First Home Saver Account
- Business Investment Account
- Business Term Deposits
- Business Direct Savings Account
- 11 a.m. Cash Account
- Certificate of Deposit
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