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FAQs: Coverage of the FCS

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The following frequently asked questions relate to the Financial Claims Scheme for banks, building societies and credit unions.

1. What banking institutions are covered under the FCS?

Under the FCS, deposits are protected up to a limit of $250,000 for each account holder at each bank, building society or credit union that is incorporated in Australia. For information on what banking institutions are covered, see Types of banking institutions covered under the FCS.

2. If I have deposits of less than $250,000 in more than one banking institution, will they all be covered under the FCS?

Yes, if each institution is licenced by APRA and if the deposits are held in accounts protected under the FCS. To see the list of banking institutions licenced by APRA go to the bank, building society or credit union page, which also includes other banking businesses that these licenced institutions operate under different trading names.

3. When a banking institution operates other banking businesses, how are they treated under the FCS?

In some instances a banking institution may operate banking businesses with different trading names under the same banking license. The FCS limit of $250,000 applies to the sum of an account holder's deposits under the one banking license.

Therefore, all deposits held by an account holder with a single banking institution must be added together towards the $250,000 FCS limit, and this includes accounts with any other banking businesses a licenced banking institution may operate under a different trading name.

You can check here to see the full list of banks, building societies and credit unions that are covered under the FCS, which includes a list of banking businesses that operate under some licenced banking institutions.

CASE STUDY: Susan has two accounts each worth $200,000. One account is with 'Bank ABC', which is licenced (authorised) by APRA, and the other account is with 'Bank XYZ' which is 'Bank ABC' but operating under a different trading name. As such, for 'Bank ABC' Susan has total deposits of $400,000 ($200,000 from each account at 'Bank ABC' and 'Bank XYZ'). However, Susan will only be covered up to the FCS limit of $250,000. In the unlikely event that Susan's bank fails and the FCS is then activated, Susan may be able to claim the remaining $150,000, or at least part of it, through the liquidation of her bank, depending on what assets are available. For further information on the liquidation process see the FAQ below.

4. Are temporary large balances covered under the FCS (for example funds from the sale of a property or a superannuation lump-sum payment)?

The FCS limit of $250,000 applies irrespective of the source or purpose of the funds, or the period for which the funds were intended to be held in an account. For amounts above $250,000, no additional protection is offered under the FCS.

5. Are non-Australian residents still covered under the FCS if they hold a protected account with an Australian banking institution?

Yes.  The residency status of an account-holder does not have an impact on whether a protected account is covered under the FCS.  However, irrespective of the residency status of an individual, deposits held with a foreign branch of a bank incorporated in Australia are not covered under the FCS.

6. Is superannuation covered under the FCS where a super fund deposits funds in a protected account with a banking institution?

An amount in a protected account with a banking institution held by a superannuation fund (through the trustee) is covered under the FCS up to $250,000.  However, in such a situation it is the fund itself (as represented by its trustee or trustees) that will be regarded as the 'account holder' under the FCS, not each individual member.

See the FAQ below for information in relation to self-managed superannuation funds (SMSFs).

7. Are self-managed superannuation funds (SMSFs) covered under the FCS?

An SMSF is treated as an account holder under the FCS for any deposits it holds in protected accounts. However, under the FCS the $250,000 limit applies to the SMSF as a whole, irrespective of the number of trustees. 

CASE STUDY: Eliza has a joint account (held with one other person) with $90,000 and a self-managed superannuation fund (SMSF) account, for which she is a co-trustee, that contains $220,000.  Both accounts are held at the same building society. For the purposes of the FCS, there is a different account holder for each of these two accounts – Eliza in her personal capacity as an individual and Eliza in her capacity as co-trustee of the SMSF. Consequently, Eliza is protected under the FCS for $45,000 in her personal capacity (comprising her half share in the joint account), and, together with her other trustees, for $220,000 in her capacity as co-trustee of the SMSF.

8. Are mortgage offset accounts covered under the FCS?

Mortgage offset accounts that are separate deposit accounts are covered under the FCS. However, mortgage accounts with redraw facilities that are not separate deposit accounts are not covered by the FCS.

9. If I have a deposit account as well as a loan with a banking institution, will the deposits be set off against  the loan under the FCS?

No.  Under the FCS, the account holder will receive the benefit of the FCS coverage up to $250,000 on their deposit account(s).  However, the account holder will still be liable for the loan (and the repayments) and will likely receive instructions in relation to any loans from the statutory manager or liquidator that are appointed at the time of the FCS.

10. What happens to personal cheques drawn on a banking institution that fails and is declared under the FCS?

Personal cheques drawn on a banking institution that fails and is declared under the FCS will not be honoured. In such circumstances alternative payment arrangements will need to be arranged with the relevant parties.

11. What happens to bank cheques drawn on a banking institution that fails and is declared under the FCS?

Bank cheques drawn on a banking institution that fails and is declared under the FCS are not protected under the FCS. However, bank cheques remain a claim on the banking institution that issued the cheque, and a claim can be made in any subsequent liquidation process.

12. Are letters of credit and bank guarantees covered under the FCS?

No. Letters of credit and bank guarantees from a banking institution declared under the FCS are not covered under the FCS. A claim would need to be made in any subsequent liquidation process.

13. Are balances held in solicitors’ or real estate agents’ trust accounts (where such funds are pooled together) covered under the FCS?

Yes, however the FCS limit of $250,000 will apply to the entire pooled trust account with the banking institution, rather than to each separate client or beneficiary.

 

If you are unable to find the information you are looking for on this page, please contact APRA via the Contact Us page. If you are seeking technical information on the implementation of the FCS go to the Prudential Framework for the Financial Claims Scheme for authorised deposit-taking institutions on APRA's website.