Extended deposit guarantee scheme begins today

Marac Finance is one of the seven financial entities taking part in the new retail deposit guarantee scheme.

The Government's extended Retail Deposit Scheme has kicked off this morning with just seven entities and $2.25 billion deposits under guarantee.

The scheme runs until the end of next year and replaces the original Government guarantee scheme, which saw taxpayers bail out bondholders in South Canterbury Finance to the tune of almost $2 billion.

The initial two-year scheme was introduced by the Labour-led government at the height of the global financial crisis two years ago.

That scheme had $133 billion under guarantee.

The participants in the extended scheme include: Canterbury Building Society, Equitable Mortgages Limited, Fisher & Paykel Finance Limited, MARAC Finance Limited, PGG Wrightson Finance Limited, Southern Cross Building Society, and Wairarapa Building Society.

Deposit taking institutions in the current scheme are not automatically covered by the Extended Retail Deposit Guarantee Scheme and it has lower levels of protection.

Under the terms of the Extended Retail Deposit Guarantee Scheme, eligible depositors will be repaid up to a maximum of $250,000 per non-bank institution, if a participating institution defaults on its obligations.

Only deposit-taking institutions with a credit rating of BB or higher were eligible for the extended scheme.

The scheme ends on December 31, 2011.