Changes to term deposit accounts

From 1 January 2015 the standards imposed by the government regulator on deposit taking institutions are being tightened.  The measure is part of a global initiative to improve the liquidity of the finance industry.

The new standard requires financial institutions to satisfy the regulator that they have sufficient cash resources to meet potential withdrawals by depositors over a 30 day period.

Financial institutions are having to redesign their term deposit products to meet this standard.  Whilst in the past an institution may have been willing to allow an early redemption, they are now advising customers that they will no longer be able to break a term deposit unless given 31 days’ notice.  There will generally be a discretion to waive this if there is proven hardship.

As the industry takes up the new standards, at call deposit interest rates are likely to be reduced and higher rates will be offered on long term fixed deposits.

For more information contact:

Deborah Mann
Special Counsel
Harwood Andrews
T: 03 5226 8551
E: dmann@harwoodandrews.com.au