15 May 2021

Savings When a Bank Goes Broke: What Happens to Your Funds?

Line of Credit: 3 Things to Know about this Finance Instrument

If you have studied history, you know that there have been points in time when financial institutions went belly up and people lost their savings. An estimated seven banks go out of business on an annual basis. So, it’s normal to wonder every so often what happens to savings when a bank goes broke. For Australians, there is good news, but the good news is limited to those below the $250,000 limit.

Authorised Deposit-Taking Institutions (ADIs)

Under the authority of the Australian government, citizens can rest assured that their savings under $250,000 are secure if their bank goes out of business. The Australian government set up the Financial Claims Scheme (FCS) in 2008. The FCS is administered by the Australian Prudential Regulation Authority.

The Government ensures that all bank customers will receive their savings or ADI claim.  If you have more than $250,000 saved with one bank, the difference isn’t insured. If you spread around your savings, you can file more than one ADI.

In essence, these government guarantees are insurance programs for savings accounts. When you open a new savings account, double-check that the bank is a member of these schemes. It also helps to double-check the status of your current accounts. When times are shaky, you’ll feel better if you do the legwork before things go south.

Savings When A Bank Goes Broke Conclusion

The financial crisis of 2008 sent ripple effects across the globe. It’s one reason why the Australian government took action that same year. If your bank goes broke, as long as they are a member of the FCS, you can file an ADI claim. Keep in mind that the maximum per ADI claim is $250,000. It might be inconvenient to open a savings account with multiple banks, but it does offer you a guarantee.

Mortgage House is a non ADI financial institution (non-bank) and does not take cash deposits and does not offer bank accounts. 100% interest offset accounts are not bank accounts & simply treated (sub account) as a redraw facility against a loan account. Mortgage House also offers tools such as the home loan calculator.

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