What is the Depositor Compensation Scheme?
The Depositor Compensation Scheme (DCS) covers each eligible customer up to $100,000 per deposit taker (i.e. banks and non-bank deposit takers, including credit unions, building societies, and finance companies that take retail deposits) in the unlikely event the deposit taker goes out of business, and when the money is held in a DCS-protected account.
It's a Government scheme that is funded by deposit takers and administered by The Reserve Bank of New Zealand - Te Pūtea Matua (RBNZ).
Why is the scheme being introduced now?
The DCS is one of the first initiatives being implemented under the Deposit Takers Act 2023, following a review on New Zealand's financial system by the International Monetary Fund in 2017.
The introduction of the DCS aligns New Zealand with most other OECD counties and international banking best practises, offering increased confidence in the financial system. By providing a safety net, the scheme aims to enhance the stability and resilience of New Zealand's financial sector.
Which customers and products are covered by the DCS?
Most customers with eligible deposits will be covered by the scheme, including individuals, companies and trusts.
Almost all ASB deposit accounts will be covered, including transactional and savings accounts, term deposits, the ASB Cash Fund, ASB Term Fund, and positive balances on certain lending products. The scheme does not cover products such as KiwiSaver and non-NZD deposits.
We have provided a list of ASB products covered by the scheme below. Simply click to expand each section.
Deposit Accounts
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Personal
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Business
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Transaction/Saving
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Term Investment
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Positive Balances in Loan or Credit Facilities
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Personal
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Business
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Credit Cards
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Lending
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What this means for me?
There's nothing you need to do. All eligible customers with DCS-protected accounts are automatically covered once the scheme comes into effect.
You can have confidence that New Zealand has one of the world's most trusted and secure financial systems, with tough Government banking regulations in place. New Zealand banks are well placed if any financial disruptions were to occur and ASB has a strong capital base, credit rating and capacity to meet our financial commitments.
FAQ
What am I covered for?
The protection provided by the DCS will be calculated on an aggregated basis across all eligible deposit accounts held by a customer at a deposit taker, up to a maximum amount of $100,000. The RBNZ website provides example scenarios to demonstrate how much you could be covered for under the DCS.
Is my KiwiSaver covered?
Your KiwiSaver investment is not a bank deposit and is therefore not covered by the DCS or any other New Zealand Government guarantee. The ASB KiwiSaver Scheme is not guaranteed by the ASB group, the Government or any other person. Please refer to the ASB KiwiSaver Scheme Product Disclosure Statement for further information about your ASB KiwiSaver Scheme investment.
What is the likelihood of a bank or other financial institution failing?
The New Zealand Government and regulators impose some of the toughest capital requirements in the world on New Zealand banks. Customers can have confidence that New Zealand banks are some of the best capitalised and most financially sound in the world.
The Deposit Takers Act will also strengthen the supervisory and enforcement powers of the RBNZ to allow it to act before a financial institution is in trouble, providing even greater protections for depositors and further increasing the stability of the financial system.
How will compensation payments be made to customers?
As administrator of the DCS, the RBNZ will be responsible for determining the amounts payable to each eligible account holder and arranging for payments to be made as quickly as possible in the event of a failure. The means and timeframe for payments will be determined according to the circumstances of the affected institution and/or the particular account. In the event of a deposit taker failure, compensation payments are likely to be made electronically to an alternative bank account maintained by the customer.
Can ASB customers opt out of the scheme?
No, under the Deposit Takers Act legislation, DCS protection of up to $100,000 is provided automatically to all eligible customers who hold protected deposits with a licensed deposit taker (i.e., banks and non-bank deposit takers, including credit unions, building societies, and finance companies that take retail deposits).
How is the scheme funded?
The DCS will be funded by deposit takers and administered by The RBNZ.
How to find out more
For a more detailed overview of the DCS, how it works and how you might be covered, please visit the RBNZ website.