Frequently asked questions about the activation, payments and administration of the Financial Claims Scheme
The following frequently asked questions relate to the activation of, payments made under, and the administration of the Financial Claims Scheme (FCS) for account holders at banks, building societies and credit unions and general insurance policyholders.
How is the FCS activated?
The FCS can only be activated by the Australian Government in the unlikely event that a bank, building society, credit union or general insurer fails, including where it cannot meet its financial obligations.
Once activated, the FCS will be administered by APRA.
If the Government activates the FCS, funding will be provided by the Government in order to make timely payments to account holders and administer the FCS. For deposits this means APRA will endeavour to make payments to the majority of account holders within seven calendar days.
Amounts paid under the FCS and associated administration costs would be recovered through the liquidation process by way of a priority claim. Any shortfalls from the liquidation may subsequently be recovered by the Government through an industry special levy.
What should I do in the unlikely event that my bank, building society, credit union or general insurer fails?
In the unlikely event that the FCS is activated by the Australian Government, APRA has plans and protocols in place to ensure the timely payment of depositor funds or policyholder claims. In most cases FCS payment would be made either by cheque or electronically to an alternate account nominated by the account holder. If the FCS is activated, APRA and the entity will communicate directly with depositors or policyholders on any steps they need to take to access their FCS payment.
How would FCS payments be made?
If the Australian Government activates the FCS, APRA would be responsible for administering the scheme. Payments of deposit amounts to account holders can be made in several ways depending on the circumstances of the bank, building society or credit union and/or the particular deposit account. Options include, but would not be limited to:
- electronic funds transfer (EFT) – account holders may be able to elect to be paid into an alternative account (the details of which they will need to provide at the time of FCS activation);
- cheque – account holders would receive a cheque in the mail to the address that is held on file with the banking institution; or
- payment into an account of the same kind at another financial institution that APRA would establish on behalf of the account holder. This payment method is compulsory for certain prescribed accounts such as farm management deposits and retirement savings accounts.
Payments will only be made in Australian dollars, and electronic payments will only be made to Australian banks, building societies and credit unions.
What does APRA do to prepare for the activation of the FCS?
Given the important role that the FCS plays in supporting the stability of the Australian financial system, APRA continues to take steps with industry and other stakeholders to ensure an appropriate level of ongoing FCS readiness. This includes the development of procedural guidelines, ongoing self-assessments by banks, building societies and credit unions, as well as APRA-led preparedness reviews, tests and the collection of FCS data and systems information.
What is the liquidation process?
Liquidation is a process where an independent person, known as a liquidator, winds up a company by selling all its assets and using the proceeds of sale to pay its debts (or a portion of those debts where full payment is not possible). The company’s debts are paid in an order of priority. When this process has been completed the company will usually be de-registered and will cease to exist as a legal entity.
In the unlikely event that a bank, building society or credit union (otherwise known as an authorised deposit-taking institution or ADI) fails and goes into liquidation, any debts are paid out according to the order of priority set out in Commonwealth legislation, including the Banking Act 1959 (Banking Act). Under this legislation, the proceeds from the sale of a failed ADI's assets would be distributed (subject to certain exceptions) in the following order:
- to APRA, an amount equal to money paid by APRA to account-holders protected under the FCS;
- to APRA, for costs incurred in exercising its powers to administer the FCS;
- to account-holders at an ADI incorporated in Australia for amounts in protected accounts not paid out under the FCS, such as any excess over the $250,000 FCS limit;
- to the Reserve Bank of Australia, for any debts owed;
- to parties under an industry support contract certified under the Banking Act for the institution’s liabilities;
- to APRA, for costs of the statutory management of the failed institution;
- for other liabilities in the order of their priority as set out in the Corporations Act.
This means that in the liquidation of an ADI, an account-holder making a claim to recover an amount over the FCS limit of $250,000 would rank third in the order of priority listed above.
If you are unable to find the information you are looking for on this page, please contact APRA. If you are seeking technical information on the implementation of the FCS go to Financial Claims Scheme for authorised deposit-taking institutions.