From Dr Cullen
Sunday 12 October 2008
Finance Minister Michael Cullen has announced that, using his powers under the Public Finance Act, the government is to introduce an opt-in retail deposit guarantee scheme."The scheme will cover all retail deposits of participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies," he said.The deposit guarantee scheme does not include related party liabilities.The new scheme is an opt-in scheme and would take the form of a bilateral contractual agreement between the Crown and the individual institutions which take up the guarantee. The scheme will be free for institutions with total retail deposits under $5 billion. A fee of ten basis points per annum will be charged on total deposits above $5 billion. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.The government is offering this deposit guarantee to address the current situation of international financial market turbulence and it will be for a two- year term in the first instance. This will give time to see how well international financial markets stabilise in the months ahead."The deposit guarantee is designed to give assurance to New Zealand depositors. The New Zealand banking system remains sound. We want to ensure that ordinary New Zealanders feel that their deposits are safe in the current uncertain international financial market conditions," Dr Cullen said.The Reserve Bank will be releasing further details later today.
