CHOICE urges steady approach on financial claims scheme

Confidence in smaller lenders crucial for competition

CHOICE has called for a careful approach to the implementation of changes to the Financial Claims Scheme (FCS) announced by the Federal Government today (Sept 11).

The FCS currently guarantees individual bank deposits of up to $1 million and was introduced at the height of the global financial crisis in 2008. The changes will bring the cap on deposits down to $250,000 from 1 February 2012.

“The FCS plays a crucial role in promoting competition from smaller lenders by providing consumers with confidence,” says CHOICE Head of Campaigns, Matt Levey.

“While caution is required in any changes to the scheme, we welcome the fact that the scheme will be permanent, and that the cap of $250,000 is at the upper range of the options considered.

“We believe this gives consumers more reason than ever to shop around and look at what’s on offer beyond the big four banks.”

The people’s watchdog says smaller institutions rely more heavily on deposits in the medium-sized range, between $100,000 and $1 million, which allows them to better compete on financial products such as home loans.

“CHOICE is calling on the Government to ensure a steady approach to these changes, including a comprehensive consumer education campaign on issues such as the safety and security offered by credit unions, building societies and regional banks,” Mr Levey said.

CHOICE also welcomes grandfathering arrangements that will maintain the $1 million cap on term deposits until the end of 2012.

“We also want to see carefully targeted information for those institutions like schools, churches, clubs and local governments who are known to maintain large deposits with small financial institutions.”

CHOICE has strongly supported a permanent consumer deposit guarantee as part of its Better Banking Campaign, arguing that the guarantee should be properly explained to consumers in a consistent way, on all relevant banking products. You can read CHOICE’s full submission to the FCS consultation process here:

Media contact:
• Matt Levey, CHOICE, Head of Campaigns: 0488 214 066
• Ingrid Just, CHOICE, Head of Media and Spokesperson: 0430 172 669

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