Money Tip without the boring stuff - Is My Money Safe?

Even though the Government announced on Sunday 12th October, 2008 they would guarantee all savings within banks, building society and credit unions, I am still getting lots of queries.

Must admit it is confusing as the Government didn’t include the fine print.    You will not find a better guarantor than the Australian government.   Following is a link to the Treasury Department - www.treasury.gov.au.

Foreign banks who do not have an Australian subsidiary may be covered by the guarantee, provided they agree to pay a fee for the guarantee on their deposits.  For example, ING’s parent is based in Holland, but they are covered by the guarantee as they have an Australian subsidiary. 

However, institutions, such as Duetche Bank who do not have an Australian subsidiary in Australia are not automatically covered, unless they pay a fee (just a branch office who reports directly to their parent overseas).    Some commentators argue that this is fair as they were the ones who made the decision when when they set up shop in Australia they didn’t want to operate under the same rules and regulations that apply to our banks,building society and credit unions (governed by APRA - Australian Prudential and Regulatory Authority).

It is important to understand that some cash management trusts, income and mortgage trusts are also not covered.     This is causing all sorts of problems for the institutions who manage these types of trusts as large numbers of Investors are requesting to withdraw their money.  They had no choice but to freeze redemptions.   

Very stressful for retirees who want to access their money.   However, I can understand.  They have to protect all investors within the fund.  For example, a mortgage trust indirectly invests in real property which is illiquid - you just can’t sell the asset quickly.   It takes a long time to offload a 10 storey commercial property, and it would be foolish to sell at any price.

If in doubt speak to your financial planner who is getting paid to look after you,  or direct with the financial institution.   Ask for something in writing.

Wishing you all many happy investment returns.

Josie Kay
Sponsor - Property price reports Rp Data* - Do your rssearch before you buy or sell.

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