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  • Writer's pictureUHY Haines Norton

Does the Australian Bank Guarantee system really exist?

By Steve Marsten


With the recent instability in some US and Europe banking circles, it is not surprising that some Australians have concerns about the security of their savings with Australian banks.

Many may have heard about the “bank guarantee” – but what is it, what is covered, and how does it work?


But first, some trivia….

The last Australian bank failure which resulted in depositors losing money was the collapse of the Primary Producers Bank – at the height of the Great Depression in 1931.

As part of their response to the global financial crisis in 2008, the Australian government introduced a guarantee of all deposits held with Approved Deposit-Taking Institutions (ADIs). The guarantee, known as the Financial Claims Scheme (FCS), has been modified over the ensuing years, and, from 1 February 2012, the guarantee was reduced to a maximum of $250,000 per account holder, per Authorised Deposit Taking Institutions – ADI’s.

Deposits held offshore with the overseas subsidiaries of ADIs are not covered by the guarantee.


The guarantee covers each account holder. An account holder may be an individual, a company, a partnership, trustees of a trust, or trustees of a superannuation fund (including a self-managed superannuation fund). An account holder also includes an unincorporated association or body of persons such as a club or association. Each account holder is covered by the guarantee. Accounts held in joint individual names (e.g. a single account held jointly by spouses, or multiple trustees of a single trust) are treated as a single account holder.


Therefore, a person who holds an account in their individual name and another account in their name as trustee of a self-managed superannuation fund is covered for up to $250,000 of deposits held by each account holder.


For members of superannuation funds, other than self-managed superannuation funds, the guarantee is offered to the trustee of the fund, and not to each individual member of the fund. Therefore, members of large superannuation funds that have retirement savings invested in the cash account of their superannuation fund, will only share proportionately in the guarantee, in the event of the guarantee being invoked under the FCS.


In the main, the Australian banking system is robust, and the added protection of the FCS offers additional security for account holders. We should be quite proud of our banking system as it stands up well against other banking systems around the world.


For more information about this scheme feel free to ring the team at UHY Haines Norton Gladstone on 07 49 721300.


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