Deposit guarantee scheme to protect savings comes into effect

New rules have been put in place to protect savings in the event of a bank collapse.

Finance Minister Nicola Willis says under the regime, up to $100,000 per person per lending institution will be protected, including deposits made prior to 1 July.

“The implementation of this scheme should give New Zealanders extra peace of mind that if something were to go wrong at the institution where they have entrusted their money, they will get their money back,” Willis said. “It has the additional benefit of promoting better competition by providing smaller deposit takers with the ability to compete on a level playing field.”

Known as the Depositor Compensation Scheme, the regime covers banks, building societies, credit unions and finance companies. It will be funded by deposit takers and administered by the Reserve Bank

A similar deposit guarantee scheme was set up on a temporary basis in the wake of the Global Financial Crisis of 2007-2008 following the collapse of several big finance companies, including the late Allan Hubbard’s South Canterbury Finance.