The Financial Claims Scheme (FCS) is one way in which the Federal Government has responded to the current economic client.
On 17 October 2008, the FCS, which is designed to enhance the stability of Australia's financial system, was introduced by the Federal Government when the following Acts received royal assent: Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 (FSLA Act), Financial Claims Scheme (General Insurers) Levy Act 2008 (GI Act), and Financial Claims Scheme (ADIs) Levy Act 2008 (ADIs Act).
The FCS is designed to provide depositors with authorised deposit taking institutions (ADIs) (this can be a bank, building society or credit union) timely access to funds when an ADI is failing or distressed including by introducing a three-year full guarantee for deposits in ADIs. It is also designed to provide compensation to eligible policyholders with claims against a failing general insurer. The FCS also seeks to establish arrangements to improve statutory management and recapitalisation of ADIs and general insurers.
The FSLA Act introduces the main measures of the FCS by amending existing legislation such as the Banking Act 1959 and the Insurance Act 1973. The GI Act and the ADIs Act impose levies on general insurers and ADIs respectively in circumstances where the FCS is activated by the failure of a general insurer or ADI. The FCS will be administered by the Australian Prudential Regulation Authority.
The FCS provides protection for general insurers, policyholders, ADIs and depositors in the current economic climate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
