RBA to protect Australian bank deposits

by Richard Kilner

Story link: RBA to protect Australian bank deposits

The Reserve Bank of Australia is beginning to formulate a means to insure deposits to the tune of $20,000, to protect consumers should a bank go bust.

The move comes as Australian regulators seek to prevent a run on a bank, as seen in the case of British firm Northern Rock.

Each $20,000 guarantee would cover a single customer, not each individual account.

The idea was revealed in yesterday’s monthly financial review, and is thought to be large enough to cover the full deposits of some 80% of consumers.

The RBA cited Northern Rock as an example why such a deposit guarantee scheme was vital.

In that instance, the first £2,000 was guaranteed entirely, but the subsequent £33,000 was only 90% guaranteed, with a lack of a proper method to ensure payout was swift and simple.