APRA Recommends Australian Banks To Keep More Stringent Customer Records

Post by Sharat on January 7, 2010 · Under Australian Economy, Business News, banking · Comment 

Australia’s banking supervisor released an industry discussion paper on Wednesday suggesting that credit unions, banks and building societies need to start planning for the event of their own failure.

The discussion paper recommends that financial institutions will have to accurately record exactly what their depositors are entitled to in the event of their failure, under the federal government’s new claim financial claim scheme, which guarantees that depositors have immediate access to their savings should an institution fail.

The current deposit guarantee limit set by the government is $1 million and government legislation has appropriated up to $20 billion for coverage of any banking failure. However the guarantee is likely to end in October 2011, three years after it was first announced at the height of the crisis in October 2008, at which point it is widely expected that the ceiling will be reduced.

The Australian Prudential Regulation Authority (APRA) says that in order to ensure that depositors receive their funds, they would be paid using a cheque from the Reserve Bank of Australia that could be cashed at any bank.

However the guarantee can only be effective if financial institutions have the ability to provide it with insight into customer accounts.

Under current legislation, the scheme guarantees a maximum payout for the individual customer, rather than for each individual account that is held.

According to APRA not all financial institutions link all the deposit accounts held by a single customer. Some institutions allow account holders to establish an account without identifying themselves.

The discussion paper therefore recommend that financial institutions need to have the ability to inform it of just how much each customer holds on deposit with the institution by the end of each day’s trade, and be able to do so within 48 hours.

Under the scheme, debts owed by customers will not be subtracted and the guarantee covers all transaction, savings and business accounts, including mortgage offset accounts, cash management accounts and term deposits.

Accounts where deposits are linked to investments that may fluctuate in value, such as shares, are not included.

Compare Australian Term Deposit Accounts

Bookmark and Share

Related posts

Tags: , , , , , , ,

Comments

Leave a Reply







Sponsored Ads