The Treasurer has announced a reduced, permanent cap for the government guarantee for deposits in Australian credit unions, building societies and banks of $250,000 per person per institution (down from $1 million) in the event that a bank, building society or credit union becomes insolvent. The reduced limit will apply from 1 February 2012, subject to the assent of the Governor-General and the continued advice of The Council of Financial Regulators that this remains appropriate. Existing term deposits Term deposits which existed on 10 September 2011 will continue to be covered at the current level of $1 million until 31 December 2012, or until the deposit matures, whichever occurs sooner. If such a term deposit matures before 1 February 2012 and is rolled over, then the new $250,000 cap will apply from 1 February 2012. If such a term deposit matures after 1 February 2012 and is rolled over, then the new $250,000 cap will apply from the rollover date. The Government will also make the following legislative changes to the existing for the Financial Claims Scheme (FCS) framework: • removing coverage of foreign branches of Australian-incorporated credit unions, building societies and banks; • enabling an additional payment option which allows APRA to transfer deposits to a new institution; • establishing a 'look-through' mechanism for pooled trust accounts; and • enabling the Treasurer to activate the scheme earlier than the point of winding up. The FCS also applies to general insurance policyholders, but this aspect of the scheme is not part of this review.
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