Introduction
The Financial Claims Scheme (FCS) is an Australian Government scheme that was established during the 2008 global financial crisis to provide financial protection for consumers in the unlikely event of a failure of a bank, credit union, building society or general insurer. Ready access to funds helps people continue with their daily lives without significant interruption.
The FCS provides protection for depositors of banks, credit unions and building societies that are incorporated in Australia (also known as authorised deposit-taking institutions or ADIs), for deposits up to $250,000 per account holder per ADI. The scheme aims to return deposits to account holders within seven days of activation of the FCS.
The FCS also covers claims of up to $5,000 from policyholders and claimants against general insurers in Australia, as well as providing protection for eligible claimants for claims above that.
The FCS can be activated by the Australian Government in the unlikely event that an ADI or general insurer fails.
Once activated, the FCS will be administered by APRA.
The objectives of the FCS are to:
- protect depositors of ADIs, and claimants of general insurers, from potential loss in the unlikely event of the failure of these institutions;
provide depositors with prompt access to their deposits that are protected under the FCS; and - support the stability of the Australian financial system.
The FCS covers ADIs incorporated in Australia and authorised by APRA that are banks, building societies, and credit unions.
Different bank, Same Bank Licence
The Financial Claims Scheme (FCS) limit of $250,000 applies to the total amount of an account holder’s deposits with each licensed authorised deposit-taking institution (ADI). This is important, as some ADIs operate multiple banking businesses under the one banking licence, but with different trading names. For example, BankWest is part of the Commonwealth Bank, while St George is part of Westpac. Some banks also offer accounts under the name of a different company, such as a subsidiary of the ADI: for example, deposit accounts offered by RAMS are actually Westpac accounts. Some accounts may also be branded or marketed under the name of a third party, such as Bank of Queensland offering accounts under “Virgin Money Australia” name or National Australia Bank offering accounts under the “Citi” name.
A depositor might think they have accounts with two different ADIs, when both accounts are actually under the same banking licence. This could affect the depositor’s cover under the FCS, as the FCS limit of $250,000 will apply to the total amount held in all of the depositor’s accounts under the one banking licence.
