Hi Mr. Tan,
I thought you might be interested to know how the deposit guarantee scheme is being implemented in NZ.
A few points to note:
1) It is a facility where the Crown guarantees people who have deposits with institutions in the scheme. It covers all retail deposits of participating New Zealand-registered banks, and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies.
It only covers deposits and other debt securities.
2) Financial instutions are charged and the charges might be passed on to consumer at the banks' discretion.
For institutions with total retail deposits above $5 billion, a fee of 10 basis points per annum will be charged. This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
Following changes announced on 22 October 2008, there are also now fees for the new business component of registered banks and non-bank deposit-takers that are not already subject to a fee charge. These institutions whose covered liabilities are under $5 billion will be charged the following fees on the cumulative growth in their book since 12 October 2008 (with an allowance of plus 10 per cent per year on this amount):
- 10 basis points per annum to institutions rated AA minus and above
- 20 basis points per annum to institutions rated A+, A and A minus
- 50 basis points per annum to institutions rated BBB+, BBB and BBB minus
- 100 basis points per annum to institutions rated BB+ and BB
- 300 basis points per annum to institutions rated below BB or are unrated
Growth would be measured, and charged for, monthly.
3) There is a deposit coverage cap of $1 million per depositor per covered institution
4) For non-residents:
The guarantee will cover resident and non-resident holders of debt securities issued by approved New Zealand registered banks.
However, for approved local branches of overseas banks existing on 12 October 2008, the guarantee for non-resident depositors in these branches will be capped at the total amount owed to such depositors at 12 October 2008, allowing for growth of 10 percent per year.
For approved non-bank deposit takers, only debt securities held by New Zealand tax residents or New Zealand citizens will be covered by the guarantee.
In all of the above situations, the deposit coverage cap of $1 million per depositor per covered institution also applies
5) Full set of Q&A at: http://www.treasury.govt.nz/economy/guarantee/qanda
In fact, this scheme is till being fine tuned. So the details are changed from time to time.
Thank you. I hope that the Singapore Government has similar charges and safeguards.
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