APRA has issued FAQs to clarify aspects of the coverage of the Financial Claims Scheme.

APRA has emphasised that the definition of protected account is contained in section 5(4) of the Banking Act 1959 and focusses on the nature of the account, not its purpose – i.e. the definition does not depend on what the account is used for provided it has the legal features of a protected account.

How an account is treated will depend on the entity type and the way in which the account is held.

In addition Banking Regulation 6 defines the following kinds of protected account as being prescribed accounts:

• retirement savings accounts;
• farm management deposits;
• first home saver accounts.

Business accounts

APRA has confirmed that if a business account product satisfies the definition of a protected account, it is covered under the FCS.

Business accounts held by a sole trader are considered to be held in the name of the individual account-holder and are to be aggregated to the extent practicable with other protected accounts held by that account-holder with the ADI.

Business accounts held in multiple, yet separate, individual’s names are to be treated in the same manner as joint accounts and the account balance split equally between all named account-holders and aggregated with other applicable individual accounts.

All other business accounts, where the account is held in the name of the business entity, are considered to be a unique entity and treated as a separate account-holder.

If the account is held or kept in the name of a partnership, that partnership will be the account-holder. However business accounts held in multiple, separate names are to be treated in the same manner as joint accounts and the account balance split equally between all named account-holders.

Other accounts

If a product, which is used for superannuation purposes, satisfies the definition of a protected account, it is covered under the Financial Claims Scheme (FCS).

Retirement savings accounts (RSAs) are a prescribed account under the Banking Regulations 1966 and are explicitly covered.

In APRA’s view, products such as negotiable certificates of deposit or bank bills would not ordinarily fit the definition of a protected account.

Security deposits, whilst not specifically mentioned, would need to be considered in light of the definition of protected accounts.