How Safe is the $250,000 Savings Guarantee?

When you deposit money in a bank in Australia, chances are your savings are protected under the Financial Claims Scheme (FCS) which basically insures depositors in the event that their financial institution or credit union collapses. However, people may be asking how safe is the $250,000 savings guarantee?

What is the Financial Claims Scheme?

The FCS is a program created by the Australian government that guarantees to protect up to $250,000 for each account holder at each Authorised Deposit-Taking Institution (ADI) like a licensed bank, building society or credit union incorporated in Australia. It seeks to protect depositors from potential institution collapses or bankruptcy.

The deposit guarantee was established in 2008 during the Global Financial Crisis when collapses of overseas banks made people fear for the security of Australian lenders.

The guarantee covers different types of accounts including savings accounts, call accounts, term deposits, current accounts, cheque accounts, debit card accounts, transactions accounts, personal basic accounts, cash management accounts, farm management deposits, pensioner deeming accounts, mortgage offset accounts, trustee accounts, and retirement savings accounts

The FCS Isn’t Always Safe for Depositors

While the $250,000 savings guarantee seems to be an attractive offer for depositors, it isn’t always ideal. For starters, the $250,000 cap applies per person per ADI. This means it does not cover banks that are under the same ADI. So if you have more than $250,000 deposited in multiple banks that belong to the same ADI then only $250,000 will be insured under the FCS. Therefore, if you plan to keep your assets in different banks and want to reap the benefits of the FCS then you must ensure that your banks are covered by separate ADIs.

Another issue with this scheme is that it only covers up to $250,000 so if you have more than that amount deposited in your bank, then you will lose the remainder. For example, if you’ve deposited $350,000 and that bank goes into bankruptcy, you’ll lose $100,000 of your hard-earned cash.

Moreover, while the Australian Government is the only institution that can activate the FCS, it can also dissolve this scheme whenever it wants to. This removes the safety net for depositors and puts them at risk should an unprecedented financial crisis occur. Therefore your $250,000 cover can become $25,000 at the stroke of a pen or even less.

Essentially, the FCS provides only $20 billion to be made available to guarantee the deposits in any Australian bank that fails.

But $20 billion is nowhere near enough to cover the deposits in: ANZ, which as of 2012 had $397 billion; CBA, $401 billion; NAB, $420 billion; or Westpac, $395 billion. As you can see the FCS would be lucky to return cents on the dollar. How safe do you feel now?

Private Vaults to the Rescue

If you deem the modern banking system unsafe for your assets, you can always have an alternative option for guarding your wealth through your own personal safe deposit box. If you’ve invested in stocks and bonds, precious metals like gold, silver, and platinum, in rare gems, or even in cryptocurrency and cash, then private vaults are for you!

At Private Vaults Australia (PVA), we offer you a convenient place to store important items that would be difficult or impossible to replace. We are independent of the banking system. Therefore all your items stored in PVA are guaranteed to be safe from the Australian governments Bank Bail-in Laws or a fiat currency collapse.

For as low as $300 per year, you can store your valuables with us and keep them safe from any banking risks and financial downturns the economy may experience. It will even prevent you from asking how safe is the $250,000 savings guarantee? Our purpose-built facility has a 60 years history on the Redcliffe Peninsula. It has provided a safe and secure haven for the people of North Brisbane through vault storage.

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