Did you know your money in a term deposit in a NZ bank is not guaranteed by your Government?

Remember people, this is your government (really a corporation) that just lost $200 million of your hard earned Kiwisaver funds to a collapsed Portuguese ‘fail safe’ bank! Do you really still trust them!  EnvirowatchRangitikei

By Bernard Hickey: interest.co.nz

Bernard Hickey says the quiet removal of the guarantee for Kiwibank savers should remind all savers about the lack of a deposit guarantee and prompt regulators and the industry to run a public education campaign about NZ”s lack of a deposit guarantee.

Did you know that your money in a term deposit in a bank is not guaranteed by the Government?

piggy-bank-967181_1280Those in the know are aware that there is no Government guarantee, but it turns out most regular people, and certainly most term depositors, either still think there’s a guarantee, or think there’s always has been one.

New Zealand briefly had a government guarantee for retail bank deposits from October 2008 to December 2011. It was introduced at the worst point in the Global Financial Crisis to stop a run of deposits across the Tasman to the banks’ parents in Australia, where the Kevin Rudd Government offered a guarantee for depositors there.

It was quietly dropped once global markets had settled down and was replaced by a system called ‘Open Bank Resolution’. This means there is no Government guarantee and if a bank was to fail, the Reserve Bank would shut it down and manage a capital restructure overnight so that it could re-open the next day. One way a bank’s capital could be restructured by the Reserve Bank is through a ‘hair-cut’ for depositors. Essentially, the Reserve Bank would slice a certain percentage – say 10% – off the value of term deposits to allow the bank to re-open with enough capital to survive.

READ MORE:

http://www.interest.co.nz/opinion/80951/bernard-hickey-says-quiet-removal-guarantee-kiwibank-savers-should-remind-all-savers

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