Bank collapse could leave depositors vulnerable

Australia does not have deposit guarantee insurance like that used in Europe and the US, but instead have first claim over a failed bank's assets. The banks argue that the cost of deposit insurance would have to be passed on to consumers and that, as about 50 per cent of Australian bank assets are in the form of deposits, the current arrangement means that a bank would have to lose half of its assets before depositors lost any money. A group of financial regulators has recommended that the government establish a fund administered by APRA that would allow immediate payments of up to $20,000 to depositors. Any additional funds could be claimed and the initial payment reimbursed when the bank's assets were sold. Only one small bank has collapsed in Australia in the last century and even then depositors only lost $1 in every $100.

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