The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 has been introduced into Parliament by the Treasurer.
The Bill, if passed, introduces measures to implement a Financial Claims Scheme (FCS), including a three-year 100 per cent guarantee of deposits in authorised deposit-taking institutions (ADIs) (including credit unions, building societies, Cuscal Limited and Indue Ltd), and other arrangements to deal with distressed or failing financial institutions.
Importantly, the Bill does not prevent financial institutions from failing. But if they do fail, it ensures depositors can access their funds before the government recovers them in the winding up.
After three years the general provisions of the FCS will come into operation, limiting its operation to Australian denominated currency deposits. The Bill includes a mechanism to impose a cap on deposit coverage at that time. The Government has indicated that it will consider this issue at that stage.
In addition, the FCS provides compensation to eligible policyholders with claims against a failed general insurer in the event of a general insurer failure.
Amendments to the Financial Sector (Business Transfer and Group Restructure) Act 1999 will broaden the compulsory transfer of business powers that could be used to transfer business from a distressed ADI to a healthy ADI that was willing to receive (purchase) the business.