Government Guarantee

The Government Guarantee was established by the Federal Government in October 2008 as an emergency measure to protect customers with large deposits from loss in banks, building societies and credit unions in the event of financial collapse.

A number of international banks were failing at the time and the Government Guarantee offered comfort to Australians who were largely unaffected by the financial crisis.

(The Government Guarantee has also been called the Financial Claims Scheme or part of the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding.)

The deposit level was originally set at up to $1 million however from 1 January 2013 this will be permanently reduced to up to $250,000.

There is a transition period from 1 February 2012 to 31 December 2012.

The Government has set a series of rules in place for the transition period. The rules and examples follow.

If you require any further information, please call our Customer Contact Centre on 13 15 63.

Transition rules

Government Guarantee - Financial Claims Scheme

The transition period for the introduction for the Government Guarantee limit runs from 1 February 2012 to 31 December 2012. Unfortunately, the transition rules are complex and depend on the three following scenarios:

Scenario 1: An account holder has term deposit accounts opened before 11 September 2011 that have not yet matured/rolled over.

If the only account/s the person has with ME Bank are term deposits, accounts opened prior to 11 September 2011 that have not matured or rolled over, then the combined total of all Scenario 1 deposits are guaranteed up to $1 million until the earlier of 31 December 2012 or the date they mature/rollover.

Once a pre-11 September 2011 term deposit matures/rolls over during the transition period, it becomes a Scenario 2 deposit (see below).

Scenario 2: An account holder only has deposit accounts other than Scenario 1 deposits.

If the account holder does not have any Scenario 1 deposits and only has other types of deposit accounts with ME Bank, including term deposit accounts opened or rolled over on or after 11 September 2011, then the combined total of all Scenario 2 deposits is guaranteed up to $250,000 during the transition period.

Scenario 3: An account holder has a mixture of Scenario 1 and Scenario 2 deposits.

If the account holder has a mixture of pre-11 September 2011 term deposits and other deposit accounts with ME Bank, then the total amount guaranteed during the transition period is calculated as follows:

Step 1 – work out the total amount the account holder has in Scenario 1 deposits by adding together the amounts held by the account holder in Scenario 1 deposits;

Step 2 – work out the total amount the account holder has in Scenario 2 deposits up to a maximum of $250,000. This is done by adding together all the amounts held by the account holder in Scenario 2 deposits. If the total amount is less than $250,000, then the amount calculated is the total amount in Scenario 2 deposits. If the amount is $250,000 or more, then the total amount in Scenario 2 deposits is taken to be $250,000.

Step 3 – add together the total amount in Scenario 1 deposits plus the total amount in Scenario 2 deposits. If the amount is less than $1 million – the amount calculated is the amount guaranteed. If the amount calculated is $1 million or more, the amount guaranteed is $1 million.

Transition examples

Government Guarantee - Financial Claims Scheme

The transition rules are demonstrated in the following examples. The transition period is 1 February 2012 to 31 December 2012.

Example 1

On 1 February 2012, Jane has $1,050,000 in a pre-11 September 2011 Super Members Term Deposit. On this date, the total amount guaranteed is $1,000,000.

Reason: Jane has a Scenario 1 deposit which is guaranteed up to a maximum of $1 million during the transition period.

Example 2

On 3 March 2012, Paul has $200,000 in an Online Savings Account and $70,000 in an EveryDay Transaction Account. On this date, the total amount guaranteed is $250,000.

Reason: The combined total of all Scenario 2 deposits is only guaranteed up to a maximum of $250,000 during the transition period.

Example 3

On 4 February 2012, Mary has $500,000 in a pre-11 September 2011 Super Members Term Deposit, $300,000 in an Online Savings Account and $50,000 in an EveryDay Transaction Account. On this date, the total amount guaranteed is $750,000.

Reasons: As Mary has a mixture of Scenario 1 deposits (being the pre-11 September 2011 term deposit) and Scenario 2 deposits (Online Savings Account and EveryDay Transaction Account), the total amount guaranteed during the transition period is calculated by:

Step 1: work out the total amount in Scenario 1 deposits - $500,000;

Step 2: work out the total amount in Scenario 2 deposits – this amount is taken to be $250,000, as the combined total of the amounts held in the Online Savings Account and EveryDay Transaction Account ($350,000) is more than $250,000. The new $250,000 guarantee limit applies to Scenario 2 deposits from 1 February 2012; and

Step 3: add together the amount calculated in Step 1 ($500,000) plus the amount calculated in Step 2 ($250,000) to give a total of $750,000. As the total calculated is less than $1 million – the amount guaranteed is $750,000.

Example 4

On 6 February 2012, Joe has $1,000,000 in a pre-11 September 2011 Super Members Term Deposit and $10,000 in an EveryDay Transaction Account. On this date, the total amount guaranteed is $1 million.

Reason: As Joe has a mixture of Scenario 1 deposits (being the pre 11 September 2011 term deposit) and Scenario 2 deposits (EveryDay Transaction Account), the total amount guaranteed during the transition period is calculated by:

Step 1: work out the total amount in Scenario 1 deposits - $1,000,000;

Step 2: work out the total amount in Scenario 2 deposits – $10,000. As this amount is less than $250,000, the $10,000 in the EveryDay Transaction Account is taken to be the total amount in Scenario 2 deposits; and

Step 3: add together the amount calculated in Step 1 ($1,000,000) plus the amount calculated in Step 2 ($10,000) to give a total of $1,010,000. As the total calculated is more than $1 million – the amount guaranteed is capped at $1,000,000.

Example 5

On 3 July 2012, Lucy has $500,000 in an EveryDay Transaction Account and $10,000 in a pre -11 September 2011 Super Members Term Deposit. On this date, the total amount guaranteed is $260,000.

Reason: As Lucy has a mixture of Scenario 1 deposits (being the pre-11 September 2011 term deposit) and Scenario 2 deposits (EveryDay Transaction Account), the total amount guaranteed during the transition period is calculated by:

Step 1: work out the total amount in the Scenario 1 deposits – $10,000;

Step 2: work out the total amount in the Scenario 2 deposits – this amount is taken to be $250,000, as Mary has more in than $250,000 in her EveryDay Transaction Account. The new $250,000 guarantee limit applies to Scenario 2 deposits from 1 February 2012; and

Step 3: add together the amount calculated in Step 1 ($10,000) plus the amount calculated in Step 2 ($250,000) to give a total of $260,000. As the total calculated is less than $1 million – the amount guaranteed is $260,000.