Greens call for bank deposit insurance scheme
Many bank customers who have saved hard don't realise their money isn't protected.
In the unlikely event of a bank going under, the savings of customers could be used to help bail it out.
Now the Green Party is calling for a bank deposit insurance scheme to protect savers' money, the cost of which would be passed onto the savers.
Green Party co-leader James Shaw says every other country in the OECD has moved to protect savers' deposits with deposit insurance.
"Australians saving with the parent banks of ANZ, BNZ, ASB, or Westpac all have their deposits guaranteed up to $250,000. Kiwis saving with these same banks get no protection whatsoever," he says.
"Bill English can't seriously expect everyday savers to analyse the loan books of banks to assess their credit risk when they open their accounts, let alone do this on a six-monthly basis."
The Government ruled out the idea in 2011 after the Global Financial Crisis (GFC).
"There are now further arrangements in place to protect depositors than pre-GFC for example greater requirements on banks to hold more capital to cover deposits," says Finance Minister Bill English.
"Agencies have an ongoing work programme looking at how those arrangements can be improved."
The Greens are proposing that small investors be protected up to an amount of $100,000.
Mr Shaw says this could be funded through a small regular premium paid by the trading banks to an insurance pool to be used to protect small depositors.
Mr Shaw estimates this would lead to an added cost of around $5 to $10 per customer per year. He says this would be a "small price to pay to know your savings are safe no matter what".
Rather than a deposit insurance scheme the Government introduced the Open Bank Resolution Policy in 2011.
Here's a link to explain how it would work in the event of a bank failure.