Depositor Protection in Australia

Depositors in authorised deposit-taking institutions (ADIs) in Australia benefit from a number of layers of protection designed to ensure that their funds are safe. At the broadest level, Australia has a strong system of prudential regulation and supervision which, together with sound management at individual institutions, has meant that problems in ADIs have been rare. In addition, depositors benefit from strong protections in the unlikely event that an ADI fails. They have a priority claim on the assets of a failed ADI ahead of other unsecured creditors, known as ‘depositor preference’. Depositor protection arrangements were further strengthened in 2008 with the introduction of the Financial Claims Scheme (FCS), under which the Australian Government guarantees the timely repayment of deposits up to a predefined cap. This cap was temporarily set at $1 million per person per ADI when the FCS was introduced and is scheduled to be set on a permanent basis at $250 000 per person per ADI from 1 February 2012.