Savings guarantee cap under scrutiny
(11 July 2011 – Australia) The guarantee on savings accounts may be revised as Treasurer Wayne Swan faces tough choices.
Regulators have advised Mr Swan to limit the guarantee to between A$100,000 and A$250,000, compared with the current A$1 million cap, which was introduced in the global financial crisis.
Macquarie Bank is pushing for a cap near A$250,000 to ensure stability and a "level playing field" while Westpac has pushed for a A$100,000 cap, arguing a larger limit could inadvertently support more risky companies.
ANZ was the only other big four bank whose views were published. It supported lowering the cap to between A$100,000 and A$250,000, but did not provide further details on its preferred level.
The consumer group Choice said any reduction in the cap from A$1 million could trigger a ''flight to safety'' from credit unions, building societies and regional banks to the big four banks.
''If the level of deposits is reduced for small institutions, or if they have to offer higher interest rates to attract depositors, the smaller financial institutions would find it difficult to compete on key product lines such as home loans,'' the submission said.
Treasury has said a A$100,000 cap would cover 97 percent of all deposits, while a A$250,000 cap would cover 99 percent of accounts.
Macquarie Bank is pushing for a cap near A$250,000 to ensure stability and a "level playing field" while Westpac has pushed for a A$100,000 cap, arguing a larger limit could inadvertently support more risky companies.
ANZ was the only other big four bank whose views were published. It supported lowering the cap to between A$100,000 and A$250,000, but did not provide further details on its preferred level.
The consumer group Choice said any reduction in the cap from A$1 million could trigger a ''flight to safety'' from credit unions, building societies and regional banks to the big four banks.
''If the level of deposits is reduced for small institutions, or if they have to offer higher interest rates to attract depositors, the smaller financial institutions would find it difficult to compete on key product lines such as home loans,'' the submission said.
Treasury has said a A$100,000 cap would cover 97 percent of all deposits, while a A$250,000 cap would cover 99 percent of accounts.
Subscribe