Financial Claims Scheme update

The Australian Prudential Regulation Authority (APRA) has released a response paper and draft reporting standard in the second round of consultation on the implementation of the Financial Claims Scheme (FCS) for authorised deposit-taking institutions (ADIs).

The FCS was established in October 2008 and is designed to provide depositors with timely access to their deposits in specified covered financial products, up to a defined amount (currently up to $1 million per depositor in any one ADI until 12 October 2011), in the event that their ADI becomes insolvent. The Government will review the FCS deposit limit by October 2011.

The response paper provides comments on key issues raised in submissions to APRA’s discussion paper on the FCS released in January this year. APRA has made some modifications to the original proposals in response to certain concerns raised by industry. These include:

  • extending the period for providing FCS-related data to APRA from 48 hours to 72 hours of a request being made for the data;
  • requiring a reasonable assurance audit initially and every three years thereafter, rather than every year as proposed earlier, with limited assurance reviews in the intervening years;
  • no requirement for ADIs to include accrued interest, fees and charges in their reporting of deposit data for FCS testing purposes; and
  • providing a transition period of at least 12 months (extendable for up to a further 24 months on a case-by-case basis) before the FCS reporting obligations take effect.

Submissions on the response paper and reporting standard are due by 15 October 2010. Subject to industry feedback, APRA will release the final reporting standard in late 2010, to take effect from 1 April 2011.

However, as there will be a transition period of 12 months for ADIs to make the necessary systems and other changes, reporting obligations will not take effect until early 2012. Individual ADIs requiring a longer transition period must contact APRA for consideration on a case-by-case basis.

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