The Retail Deposit Guarantee Scheme
The Crown Retail Deposit Guarantee Scheme was introduced in New Zealand on 12 October 2008, and similar texts schemes originated in the UK and Australia to improve investor confidence at a time of global financial uncertainty.
Explained in a nutshell, the Retail Deposit Guarantee works as follows: If you have a deposit in an approved institution, the Government guarantees to pay your capital and any interest earned (to a limit of $ 1 million) if the institution gets into difficulties and is Unable to pay you itself. There are a number of situations known as "default events" which would cause the guarantee to come into effect. These include the failure of an institution to pay a required sum to an investor (including interest), and an institution being declared insolvent or being placed into statutory management. Financial institutions must apply to be covered by the scheme, which is open to New Zealand-registered banks as well as building societies, credit unions, and deposit-taking finance companies. Originally, the guarantee scheme was set to be in place for two years from 12 October 2008. Recently the government has announced that it will extend the Retail Deposit Guarantee Scheme to 31 December 2011 but change some of its terms and conditions.
Depositors of Institutions such as South Canterbury Finance which has recently made news headlines as well as depositors in a number of other failed finance companies, have been covered and are being paid out through the Retail Deposit Guarantee Scheme. All depositors holding registered debt securities are being repaid. Debt securities eligible for repayment include:
- Call deposits
- Term deposits
- Non-guaranteed deposits
In the case of South Canterbury Finance, the Crown has also decided not to impinge any upper cap or limit. This means that any investors who were owed more than $ 1 million under their South Canterbury Finance debt securities are not subject to the $ 1 million cap that previously applied under the Crown's guarantee. Citizenship or tax turnover of an investor is also not a factor in determining who is being repaid. Furthermore, wherever investments are held by an individual, jointly, a trust, a company or any other entity, repayment will not be affected.
Making a claim under the Retail Deposit Guarantee Scheme
A "Notice of Claim" form which is available form the Treasury, must be completed and submitted before the claim payment process can be initiated. As each claim will require a Statutory Declaration, this form must be signed before a Barrister or Solicitor, a Justice of the Peace or any other person authorized to take a statutory declaration. To enable the Treasury to process a claim, the claimant has to ensure that all the details requested on the "Notice of Claim" form have been duly provided and all documents or copies of documents have been attached. Treasury will normally acknowledge receipt of a claim within a week. Claims will be processed with reference to the depositor's finance company's records of their deposit. If any questions arise during this time, the Treasury will make contact to discuss them. Finally, payment is made electronically into the bank account nominated by the claimant. Alternately, a payment by cheque can be requested. A final statement of the payment is provided with details of the capital amount and interest paid, and any resident withholding or non-resident withholding tax deducted and paid to the IRD.
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