why does this story make me nervous?
BANK customers would be guaranteed to quickly recover $20,000 of their deposits if their bank collapsed under a plan before the federal Government to retain confidence in the nation's financial system.
The Reserve Bank said the nation's banking system remained robust despite the global credit squeeze caused by the collapse of the US sub-prime mortgage market last year.
But it revealed the nation's peak financial regulators, led by the Reserve Bank, had recommended the commonwealth introduce a scheme to guarantee to quickly repay the first $20,000 of customer's deposits with a bank, building society or credit union if the institution collapsed.
The scheme would involve the commonwealth repaying the failed institution's customers with funds it has on deposit at the Reserve Bank, and then recovering the money by selling the institution's assets.
The move, first considered by the Wallis inquiry into the banking system in 1997 and revived after the 2001 collapse of insurance giant HIH left many policyholders out of pocket, would help protect Australians from losing money in the event of a bank collapse such as the recent failure of Northern Rock in Britain or Bear Stearns in the US.