Government announcement - guarantee of deposits
In a move to support Australian Financial Institutions in the current economic climate, the Government has announced guarantee of deposits in eligible Australian Banks, Building Societies and Credit Unions.
Initially, the Government announced an uncapped guarantee, however it has since changed its policy after receiving pressure from the RBA and various economists to cap the guarantee. It is likely to extend to $1 million, with a fee payable for amounts higher. A decision is expected to be made in the near future.
The move comes as Australian Financial Institutions need to compete with foreign financial institutions who now have the advantage of a Government Guarantee.
Federal Opposition Leader, Malcolm Turnbull supported the Government’s position and assured the financial sector that the Coalition would assist the Government in ensuring the necessary legislation would pass through Parliament promptly.
This is positive news for landlords of commercial premises holding cash security deposits provided that the cash security deposit is deposited in an institution guaranteed under the proposal. The Australian Government website: www.treasury.gov.au offers a comprehensive list of institutions and deposits eligible to be guaranteed.
Under the Retail Leases Act 1994, cash security deposits for retail leases are required to be deposited with the Director General of the Department of State and Regional Development. These deposits are secured by the NSW State Government.
In light of the current climate, landlords of commercial premises may need to consider:
- transferring deposits that are not held by guaranteed institutions; and/or
- accepting a cash security deposit in lieu of a bank guarantee or a mixture of both to spread the risk.
Author: Vincent Tripodina, Solicitor
