In my AFR column today on credit risk I think I provide one of the first estimates I've seen of the value of bank deposits that are not government guaranteed. Excluding certificates of deposits and foreign currency deposits, I get a total resident deposit value of circa $1.23 trillion from RBA data. I then went to the 2012-13 budget and looked up the contingent liabilities. Based on this, I found that the Treasury reckons that the value of deposits covered by the taxpayer guarantees was $623 billion as at February 2012. I then confirmed with government that this includes both fully covered deposits and those deposits that are partially covered (due to multiple bank accounts or individual accounts greater than $250k). Accordingly, it looks like roughly half the value of total ADI deposits are not covered by the taxpayer guarantees--a fair bit larger than I suspect most people expected. This is what I wrote today:
The Financial Claims Scheme protects ADIs against a sudden flight of retail funding, and creditors against the danger ADIs don’t pay them back. While most observers think this insurance, which covers around $623 billion of deposits, is a vital bulwark against ADI insolvency, we now charge nothing for it. Last Friday Reserve Bank of Australia governor Glenn Stevens revealed he was not opposed to doing so. The Australian Securities and Investments Commission also has reservations about the exploitation of credit risk ignorance in the burgeoning “hybrid” securities market, which has raised billions from retail investors by dressing equity up as debt.
