Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28


The collapse of Lehman Brothers in 2008 led to a global financial crisis. Leaders of the G-7 countries agreed on October 10, 2008, to five principles for addressing the crisis, including the need for sound deposit insurance. On October 12, Australia’s prime minister announced a deposit insurance program that his government had first publicly vetted in June. Anticipating Australia’s announcement, New Zealand’s prime minister announced its own deposit guarantee scheme on the same afternoon. The government launched the Crown Retail Deposit Guarantee Scheme (the Scheme) “to ensure ongoing retail depositor confidence in New Zealand’s financial system, given turbulence in the international financial system.” To do this, the Treasury said it would provide an unlimited guarantee of all retail deposits of eligible institutions; on October 22, it set a cap of 1 million New Zealand dollars (NZD; about USD 600,000) per depositor. Unlike Australia’s scheme and most other deposit schemes introduced during the Global Financial Crisis (GFC), New Zealand’s guarantee covered deposits in finance companies and holdings in some types of collective investment schemes. Unlike Australia’s program and most others, it was not mandatory; institutions could opt in, and all eligible institutions did so. The Scheme was intended to last two years, until October 12, 2010. However, the government ultimately extended the Scheme until December 31, 2011. When the Scheme was extended, fees shifted from a flat rate to risk-based rates. During its operation, nine nonbank financial institutions failed. The Scheme paid NZD 1.9 billion in claims. It ultimately paid out 100% of deposits to all depositors of failed institutions, despite the NZD 1 million cap, because of the administrative challenge of identifying depositors under the cap. The Scheme collected NZD 1.1 billion from receiverships and NZD 237 million in fees. New Zealand has not reinstated deposit insurance since the Scheme expired.

Date Revised