14 Oct 2008

Banks join Government guarantee scheme

1:01 pm on 14 October 2008

Major banks have confirmed they will take part in a New Zealand Government scheme to guarantee bank deposits.

The New Zealand Government is to guarantee all deposits for two years, in banks, credit unions and finance companies that opt into the scheme.

The deposit guarantee was announced on Sunday. It will cover all deposits for two years, worth up to $150 billion, as governments around the world take steps to minimise the fallout from the financial crisis.

Banks and financial institutions with less than $5 billion in deposits will get a free guarantee.

The Government will charge a fee to those with more than $5 billion in deposits. A similar guarantee in Australia will last three years.

All four major banks, as well as KiwiBank, have now indicated they will join the scheme.

ASB, Westpac and KiwiBank say the scheme provides extra assurance to its customers that their money is safe is these uncertain times.

ANZ-National and BNZ are Australian-owned, as are Westpac and the ASB. KiwiBank is owned by the New Zealand Government.

Reserve Bank Governor Alan Bollard says the guarantee on deposits will not lead to a flight of money to large banks.

Dr Bollard told Morning Report the guarantee is over a "wide net" of deposit-taking institutions, to reduce the risk people would pull their money out in favour of the larger banks.

Financial Services Federation chief executive Justin Kerr welcomed the inclusion of non-bank institutions in the scheme.

Mr Kerr told Morning Report the coordinated move with Australia is an appropriate response to the international market turbulence.