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What happens with claims or when an institution defaults? Part 2 - Questions and Answers - Retail Deposit Guarantee Scheme

Page updated 7 Apr 2011

Disclaimer: The information posted here as Questions and Answers is provided for general guidance only. The terms of the Guarantee deeds signed by approved institutions (not the terms of these guidance notes) are the rules that govern all arrangements pertaining to the Crown's guarantee and the obligations that bind approved institutions. The Treasury is administrator of the guarantee on behalf of the Crown and is not an independent adviser to depositors about financial or legal issues.

The guidance contained in these Questions and Answers are subject to ongoing clarification, addition and amendment. Please press F5 to refresh this page, to ensure you are viewing the most up-to-date information.

Questions and Answers

2.1 In what situations would the Crown make payments to eligible depositors?

Updated 12 Oct 2010

The Crown will pay eligible retail investors if:

  • the guaranteed institution fails to make payment to its investors on time or another default event has occurred; or
  • the guaranteed institution fails to make payment to its investors within 14 days.

There are a number of situations known as default events, including the appointment of a receiver.

A credit rating downgrade is not a default event.

Note: it is not possible before a default for the Treasury to provide assurance that any particular depositor satisfies eligibility criteria. The Treasury will not determine eligibility unless it has received a claim for payment after default by a Crown guaranteed institution.

2.2 What payments are covered if an institution defaults?

Updated 12 Oct 2010

If an institution defaults between 12 October 2010 and 31 December 2011, the Crown will repay the principal deposited and interest that is owed (if any) up to the date of default. All payments are subject to caps, as outlined in answer to question 1.8.

Depositors have no right to be paid interest after the date of a default.

The Crown will not be responsible for any liabilities to eligible retail investors assumed by a member institution under a moratorium that has not been first approved by the Crown.

2.3 Do I have to make a claim if an institution defaults?

Updated 12 Oct 2010

If an institution participating in the retail deposit guarantee scheme defaults, then a claim form will be sent to depositors. To be considered for payment under the terms of the Crown guarantee, depositors need to complete the claim form and return it.

2.4 How much time do I have to make a claim?

Updated 7 Apr 2011

In Principle, you must submit your notice of claim within 180 days of the date on which your bank, finance company, building society or credit union has failed to pay you on time. In most cases this will be 180 days after the institution defaults. However, the Crown has discretion to extend the deadline if circumstances require, such as if there has been a delay in supplying depositors with the forms they need to make a claim.

2.5 What if I also benefit from another guarantee?

Updated 12 Oct 2010

If you have the benefit of another guarantee, for example, from the institution’s parent company or from another entity covering debt securities that are also covered by the Crown guarantee, you must first make a claim under that other guarantee. You may only make a claim under the Crown guarantee if you have not been paid under that other guarantee within 14 days of making a claim under that other guarantee.

2.6 How long will it take to get my money back after I make my claim?

Updated 12 Oct 2010

There is no fixed period for repayment, but payment to eligible creditors will be made as soon as practicable once we receive a correctly completed notice of claim and have assessed your eligibility and the proper amount to pay.

2.7 How much can I claim if I have a joint account?

Updated 12 Oct 2010

Please see the answer to question 1.13 for an explanation of joint accounts and question 1.8 for the coverage limits that apply to joint accounts.

2.8 Is there a cap on the value of deposits that are guaranteed?

Updated 12 Oct 2010

Limits on the amounts that can be paid under the retail deposit guarantee scheme are outlined in answer to question 1.8.

2.9 Can I make a claim if I have acquired a debt security after a default has occurred?

Updated 12 Oct 2010

If you make a deposit or acquire a debt security after a default, then you will not normally be entitled to make a claim.  However, estates will be allowed to make claims in respect of debt securities covered by the Crown guarantee, even where the debt securities have been acquired by the executor or administrator on appointment after the date of default, provided it was the deceased person who originally made the deposit rather than the administrator or executor.

2.10 Are there exceptions, so people who may be ineligible can still make a successful claim?

Updated 12 Oct 2010

These exceptions are outlined in answer to question 1.11.

2.11 Is my estate covered if I die after an institution defaults or after I’ve claimed for repayment?

Updated 12 Oct 2010

If you die after you have made a claim for repayment, the position is the same as if you had died after the financial institution defaulted.  Please read question 1.12 for guidance about deceased persons' estates.

2.12 Does it cost anything to claim back my money under the Crown guarantee?

Updated 12 Oct 2010

You do not need to pay the Treasury to make a claim under the terms of the Crown guarantee. However, if you use a professional to help you with your claim (such as a lawyer, accountant, broker or other adviser) then you may need to pay them.

2.13 Why do I need to provide personal details and so much other information when I make a claim?

Updated 12 Oct 2010

Claimants/depositors are calling on the Crown to hand over taxpayers' money, so it is important to ensure that we pay the right amounts to the right people and that they are entitled to receive payment.

The Crown and the deposit-taking companies don't hold all the necessary information, so the information and copies of supporting documents that we ask for as part of the claim process are essential to establishing each claimant/depositor's identity, their eligibility for payment, and the correct details for payment.

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