APRA Explains - the Financial Claims Scheme

The Financial Claims Scheme (FCS) is an Australian Government scheme that provides financial protection for:

• depositors of authorised deposit-taking institutions (ADIs) incorporated in Australia, such as banks, credit unions and building societies; and
• general insurance policyholders.

The FCS can be activated by the Australian Government in the unlikely event that one of these institutions fails, meaning it can no longer meet its financial obligations.

Once activated, the FCS will be administered by APRA.

Although the FCS has only been activated once (in 2009), its existence helps support public confidence in the stability of the financial system.

Who and what does the FCS cover?

The FCS is a government-backed safety net for ADI deposits of up to $250,000 per account holder per ADI. It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria. 

The FCS covers all Australian-incorporated ADIs and all APRA-regulated general insurers.

• A list of covered ADIs can be found here.
• A list of covered general insurers can be found here.

ADIs

For ADIs, the FCS provides cover for up to $250,000 per account holder per ADI. The FCS protects a wide range of accounts held in Australian dollars – including transaction, savings and cheque accounts, term deposits and mortgage offset accounts (where the offset account is a separate deposit account). An account holder can be an individual, but it can also be an entity such as a company, a trust or a self-managed superannuation fund.

The FCS $250,000 limit applies to the total amount of an account holder’s deposits with each banking institution. This is important, as some ADIs market themselves under more than one brand. For example, BankWest is part of the Commonwealth Bank, while St George is part of Westpac. Some banks also offer accounts through third parties: for example, deposit accounts offered by RAMS are actually Westpac accounts.

This means that a depositor might think they have accounts with two different banks, when both accounts are actually with the same institution. This could affect the depositor’s total coverage under the FCS. APRA recommends that individuals contact their institution directly if they have any questions about their level of cover under the FCS.

General insurers

For general insurance, most claims by policyholders are covered up to $5,000. Claims over $5,000 are also covered for eligible policyholders and certain third parties. In most cases, a claim can only be made against a failed insurer under the FCS if the insurance policy is issued by that insurer.

Further information on insurance coverage under the FCS can be found here.

APRA and the FCS

In relation to the FCS, the aim of APRA’s work is to ensure that individuals and entities covered by the FCS can be provided with quick access to their deposits in the unlikely event of a failure. As such, APRA has protocols in place to ensure the timely payment of depositor funds or policyholder claims in the unlikely event that the FCS is activated by the Government.

For example, if the Government activates the FCS due to the failure of a banking institution, APRA will endeavour to pay most account holders, or enable them to access their FCS payments within seven calendar days. In most cases, FCS payment would be made either by cheque, or electronically to an alternate account nominated by the account holder. If the FCS is declared, APRA and the entity would communicate directly with the depositors or policyholders on any steps they need to take to access their FCS payment.

If you have any further questions about the Scheme, please visit the FCS website.