KEY POINTS:
The Government is offering to guarantee all retail bank deposits, Finance Minister Michael Cullen said today.
Dr Cullen said he would use his powers under the Public Finance Act to introduce an opt-in retail deposit guarantee scheme.
"The scheme will cover 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," he said.
The new scheme is an opt-in scheme and would take the form of a bilateral contractual agreement between the Crown and the individual institutions which take up the guarantee.
The scheme will be free for institutions with total retail deposits under $5 billion.
A fee of 10 basis points per annum will be charged on total deposits above $5 billion.
This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
The move comes as countries around the world grapple to deal with the freeze on international credit that is chilling the world economy.
Dr Cullen said the offer would be for a two-year term in the first instance, to give time to see how well international financial markets stabilise in the months ahead.
"The deposit guarantee is designed to give assurance to New Zealand depositors. The New Zealand banking system remains sound. We want to ensure that ordinary New Zealanders feel that their deposits are safe in the current uncertain international financial market conditions," Dr Cullen said.
- NZPA
