Financial Claims Scheme: What you need to know

If you have money saved with an Australian bank then you’ll want to know what happens to your savings should that bank fail. Your money could be protected by an Australian Government guarantee known as the Financial Claims Scheme (FCS). So what kind of financial institutions and accounts are covered?

What is the Financial Claims Scheme (FSC)?

The Financial Claims Scheme (FCS) is an Australian Government guarantee that aims to protect you if you have any money held in accounts with eligible Australian banks, credit unions and other financial institutions.

The scheme, set up during the global financial crisis (GFC) in 2008, covers deposits (e.g. your savings and term deposits etc.) up to a total of $250,000 per account holder, per institution.

Financial institutions covered by the scheme are known as ‘authorised deposit-taking institutions‘ (ADIs) and are regulated by the Australian Prudential Regulation Authority (APRA).

APRA says an account holder can be an individual, as well as an entity such as a company, a trust or a self-managed superannuation fund.

The FCS also covers claims of up to $5,000 on policies from general insurers in Australia (e.g. car and home insurers), and provides protection for eligible claimants for claims above that amount.

The FCS can only be activated by the Australian Government if a financial institution fails so it can’t meet its financial obligations. If that happens, APRA says it will aim to make any payments to the majority of account holders within seven days.

What deposits are covered by the Financial Claims Scheme?

APRA says the FCS applies to a wide range of account types, including:

1. savings accounts
2. call accounts
3. term deposits
4. current accounts
5. cheque accounts
6. debit card accounts
7. transaction accounts
8. personal basic accounts
9. cash management accounts
10. farm management deposit accounts
11. pensioner deeming accounts
12. mortgage offset accounts (either 100 per cent or partial offset) that are separate deposit accounts
13. trustee accounts
14. retirement savings accounts.

According to APRA, the scheme does not apply to:

1. accounts with funds that are not in Australian dollars
2. accounts kept at overseas branches of Australian banks
3. credit balances on credit card facilities or other loans
4. prepaid card facilities or similar products
5. ‘nostro’ accounts and ‘vostro’ accounts of foreign corporations that carry on banking business or otherwise provide financial services in a foreign country.

The catch is that APRA will only pay you up to a maximum of $250,000 on any money you have in accounts with one institution.

According to APRA, some financial institutions may operate multiple banking businesses with different trading names under the same banking licence. But under the FCS, any savings or deposits you have with several businesses trading under the same licence will only be covered to a total of $250,000.

For example, the Commonwealth Bank (CBA) and Bankwest operate under the one banking licence, so the CBA says the $250,000 limit will only apply to the aggregate balance of any eligible accounts held across CBA and Bankwest.

When it comes to Westpac, it also operates the Bank of Melbourne, St.George Bank, BankSA and RAMS under the one banking licence with regard to the FSC.

If you are a joint account holder, then the amount of any FCS protection is determined by splitting the deposit equally between the account holders.

If you want to know more about how your money would be protected then you should check wherever you have savings or deposits to see what total amount would be covered by the FSC, especially if you have accounts with a number of institutions.

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