Financial Claims Scheme

What is the ‘government guarantee’?

The Financial Claims Scheme (FCS) (also known as the ‘government guarantee’) is an Australian Government initiative introduced following the 2008 global-financial crisis (GFC). The scheme was introduced to instil confidence in Australian deposit-holders that their capital was safe in the banks.

Under the FCS, deposit-holders with Authorised Deposit-taking Institutions (ADIs) including banks, credit unions and building societies incorporated in Australia, are covered by the guarantee for up to $250,000 per account holder per ADI, in the event one of these financial institutions fails.

Australia’s banking system

Australia has a strong banking system by global standards, however this does not mean term deposits are without risk.

During the GFC a 150+ year old American global financial services firm, Lehman Brothers, collapsed. At the time it was the fourth-largest investment bank in the United States with about 25,000 employees. Based on staff head-count alone, it was larger than more than 90% of Australian banks.

The introduction of the Financial Claims Scheme was a move by the Australian Government to make the public confident that they money was safe in the bank. A similar position has been taken in the United Kingdom and other major countries.

Limitations to the Financial Claims Scheme

In our eBook we explain some of the limitations of the Financial Claims Scheme. These limitations are not broadly publicised however are important for having a complete understanding of the level of protection provided to term deposit holders under the FCS.

We encourage you to download a copy to help you make an information decision.

FREE eBook: 7 vital facts every term deposit holder should know