Big 4 banks being supported - what happens to 2nd tier?

Hi all,

Government is clearly getting behind the big 4 banks - I have 2 questions:
1) What level of support will they provide? For eg, will they support them to a point where they break even? Or do they support them to a level where they are maintaining the same level of profit as last year?
2) What happens to second tier lenders if they are providing mortgage relief etc. I have a PPOR PI loan with Firstmac and some family members have investment loans with Liberty. I've read that these banks aren't guaranteed by the government - is it risky having money in offset accounts with these banks?

Thanks

 

You really need to understand what is a bank, a ADI, non-bank and non-ADI. You are mixing terms and in this environment.....

 

Firstmac isn't a bank, and neither is Liberty - but you owe them money.

 

I think he’s worrying about the money in his offset account with the loans. And he’s asking if these money is under government $250k guarantees

 

There is no offset account. It is a redraw account disguised as the lender is not an ADI.

not covered by the guarantee, but it is a reduction in the amount owed so does it matter?

 

Non-bank perplexed at ASIC offset warning - Mortgage Business

This is a bit old but wonder if its still valid.

It specifically uses the words offset redraw, which is an oxymoron. Guess that with these things you cant have more than the original loan balance.

 

The Govt Guarantee applies to Authorised Deposit-taking Institutions (ADIs).

Refer to list of ADIs in the Register of authorised deposit-taking institutions | APRA

If the provider of that financial product (offset redraw or whatever brand or terminology) is offered by an institution that is not in the Register, it's probably not covered by the $250k Govt Guarantee.

 

There has been some support for non banks as part of the coronavirus response, largely by assisting in reducing funding costs and providing access to cheaper source of funds.

Supporting the Flow of Credit | Treasury.gov.au

Not direct to customers, but lower funding costs for non-banks should feed through to borrower rates.

Note the reason for this support is largely because funding costs in wholesale markets have increased for non banks with all the market turbulence. Ie their costs have increased. This particular measure is designed to assist in cushioning this impact.

 

ING is on the list

 

You must be looking at IN1Bank Ltd
See ING Bank (Australia) Limited (trading as ING)

 

I actually called ASIC last week and asked them ING bank. And they directed me to check the ING website. Scroll to the very bottom of the page and it’s says:
“ING is a business name of ING Bank (Australia) Limited ABN 24 000 893 292 AFSL 229823, Australian Credit Licence 229823.”
And then Check the name on the ASIC website and it’s in that guarantee cover list.

 

I was worry about this too. Just recently opened ING account with them after reading the book the barefoot investor!

 

Does anyone know if Commsec Commonwealth Direct Investment Account (CDIA) is covered under this Gov guarantee or not? Thanks

 

Ok, I just found the answer: yes it is.
Is the CDIA covered under the Financial Claims Scheme?
Funds in your Commonwealth Direct Investment Account (CDIA) are included as part of your deposits covered by the Commonwealth Government Financial Claims Scheme of up to $250,000.

For further information regarding the Financial Claim Scheme, please visit APRA or call on 1300 55 88 49 (if calling from within Australia) or +61 2 9210 3480 (if calling from outside Australia).
Is the CDIA covered under the Financial Claims Scheme?

 

It's also worths to note that only these types of accounts are guaranteed:
The Financial Claims Scheme applies to the following accounts:Types of accounts covered under the Financial Claims Scheme | APRA

• savings accounts
• call accounts
• term deposits
• current accounts
• cheque accounts
• debit card accounts
• transactions accounts
• personal basic accounts
• cash management accounts
• farm management deposit accounts
• pensioner deeming accounts
• mortgage offset accounts (either 100 per cent or partial offset) that are separate deposit accounts
• trustee accounts
• retirement savings accounts

 

Australian Government guarantee
Which Firstmac accounts does the guarantee apply to?



The Firstmac deposit products are covered by the Australian Government Guarantee. The Australian Government automatically guarantees deposits which are placed with an Authorised Deposit-taking Institution (ADI), up to the balance of $250,000. Firstmac deposits are issued by Goldfields Money Limited, a registered ADI under the Financial Claims Scheme. The sum of all balances held by you in Firstmac and Goldfields Money deposit accounts are covered by the Australian Government guarantee, up to the balance of $250,000.

For further information on the Financial Claims Scheme (FCS) please visit their website and FAQ’s .

 

Very interesting!