by Susan Edmunds
The Reserve Bank is planning to implement Open Bank Resolution, which could leave account-holders facing a loss if a bank falls over.
The scheme would mean a failed bank has to write down the value of the most pressing unsecured liabilities straight away in the event of statutory managers being called in, so service can resume the next day and allow customer transactions to keep flowing.
Reserve Bank head of prudential supervision Toby Fiennes said a Government could still decide to bail out a bank or let it go into liquidation.
The Bank claims deposit insurance increases the likelihood of bank failure and encourages riskier behaviour.
But David Tripe, of Massey University’s centre for banking studies, said a deposit insurance system was fairer because it protected small deposit holders.
He said the kind of risky behaviour the bank would worry about was among people who moved large sums of money around, not small savers.
In Australia, depositors’ savings are protected up to $250,000.
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