Rabobank rejects government guarantee
Rabobank Australia, along with its online investment division RaboPlus, has rejected the government guarantee of deposits above $1 million.
RaboPlus general manager Greg McAweeney said it was difficult for the bank to justify charging clients a fee for the extended guarantee in light of the fact that Rabobank Australia has a AAA credit rating.
McAweeney said RaboPlus and Rabobank have no current plans to issue a government guaranteed retail product for deposits above $1 million, and “Rabobank’s ultimate parent, Rabobank Nederland, has no intention of asking for government support either”.
The group said the government guarantee is “potentially costly”.
While there is no charge for the guarantee of retail deposits under $1 million, authorised deposit taking institutions (ADIs) that extend the guarantee to deposits over $1 million will be charged a fee. AAA to AA- credit rated ADIs will be charged 70 basis points, while institutions with ratings of A+ or lower must pay up to 150 basis points to offer the guarantee.
Macquarie Bank is one institution that has decided to absorb the cost of the guarantee. But McAweeney said it was likely that “banks which choose to pay for the guarantee would pass the charge on to customers either directly or indirectly”.
This is likely to lead to consumers with funds over a $1 million spreading their deposits across many banks to avoid extra charges, McAweeney said.
Rabobank Nederland guarantees the liabilities of Rabobank Australia. McAweeney said the parent company has performed well during the recent global financial turmoil and recently reported strong interim results for 2008. Rabobank Nederland is among the world’s 20 largest financial institutions. It has no public shareholders.
AUTHOR
Mike Taylor
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