The following frequently asked questions relate to the Financial Claims Scheme for banks, building societies and credit unions.
1. If the FCS is activated by the Australian Government, how would payments be made?
If the FCS is activated by the Australian Government, APRA would be responsible for administering the Scheme. The means of payment would be determined according to the circumstances of the affected institution and/or the particular deposit account. Options include, but would not be limited to:
payment by cheque;
electronic funds transfer (EFT) into an alternative account nominated by the account holder; or
payment into an account of the same kind at another financial institution that APRA would establish on behalf of the account holder.This payment method is compulsory for certain prescribed accounts such as farm management accounts and retirement savings accounts.
2. If the FCS is activated, when would payments be made?
In the unlikely event that the FCS is activated by the Australian Government, APRA would endeavour to make payments under the Scheme to the majority of account holders within seven calendar days. Payments in some circumstances may take longer.
3. How are funds protected under the FCS calculated?
Your FCS entitlement is based on the sum of your account balances at the time the FCS is declared, subject to the $250,000 limit. Your entitlement will be adjusted to include interest up to the time of declaration of the FCS, and adjusted to deduct certain fees, charges and tax.
4. If the FCS is activated and my only account is with the failed bank, how will I be paid my FCS entitlement?
In the unlikely event that the FCS is activated by the Australian Government, in most cases you will be able to elect to either be paid your FCS entitlement into an alternative account (the details of which you will need to provide) or to receive a cheque in the mail (to the address that is held on file with the banking institution).
Affected account holders without an alternative account would need to open a new account at a bank, building society or credit union in order to receive the electronic payment or to deposit the cheque. If you elect for your FCS entitlement to be paid electronically into a new account, you will need to provide the new account details within approximately 48 hours after the FCS being declared.
Payments will only be made in Australian dollars, and electronic payments will only be made to Australian banks, building societies and credit unions.
5. What is the liquidation process?
Liquidation is a process where an independent person, known as a liquidator, winds up a company by selling all its assets and paying its debts (or a portion of those debts where full payment is not possible) from the proceeds of the sale. The company’s debts are paid in an order of priority. When this process has been completed the company will usually be de-registered and will cease to exist as a legal entity. For example, in the unlikely event that a bank, building society or credit union incorporated in Australia fails and goes into into liquidation, any debts are paid out according to priority rules set out in Commonwealth legislation, including the Banking Act. Under the legislation, the proceeds from the sale of a failed banking institution's assets would be distributed (subject to certain exceptions) in the following order:
- to APRA, an amount equal to money paid by APRA to account-holders protected under the FCS;
- to APRA, for costs incurred in exercising its powers to administer the FCS;
- to account-holders at a bank, building society or credit union incorporated in Australia for amounts in protected accounts not paid out under the FCS, such as any excess over the $250,000 FCS limit;
- to the RBA, for any debts owed;
- to parties under an industry support contract certified under the Banking Act for the institution’s liabilities;
- to APRA, for costs of the statutory management of the failed institution;
- for other liabilities in the order of their priority as set out in the Corporations Act.
This means that in the liquidation of a bank, building society or credit union incorporated in Australia, an account-holder making a claim to recover an amount over the FCS limit of $250,000 would rank third in the order of priority listed above.
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.