Westpac yet to decide on deposit scheme 

Source: ONE NewsWestpac bank

Westpac New Zealand is still deciding if it will opt into the extended Crown deposit guarantee scheme.

The government created a retail deposit guarantee scheme in 2008 to give people confidence that their deposits were safe during a period of financial turbulence. The move was prompted by the introduction of a scheme in Australia. Westpac and other banks opted in.

The scheme guarantees deposits for two years, from October 12 2008. The government has announced an extended scheme will apply from October 12, 2010 to December 31, 2011 but with new terms and conditions.

Finance companies have welcomed the deposit guarantee scheme but banks have complained the burden of funding it fell mostly on them when they least needed it.

The government also operates a wholesale funding guarantee scheme, which helps banks raise money in offshore markets.

Westpac said when announcing its profit on Wednesday that it is yet to decide whether to opt into the extended deposit guarantee scheme.

"My sense is that if you look at the larger banks that are extremely well rated, with AA ratings, you would have to say that the ongoing need for the deposit guarantee scheme is not there," Westpac NZ chief executive George Frazis said.

"It is something we will have to get off eventually. For smaller players it may still be required."

The wholesale guarantee scheme was important, particularly with increased liquidity requirements for banks, he said.

"Although there are some signs that you may be able to start raising wholesale funds out of New Zealand without it, it is early days.

"I would not be advocating the removal of that," he said.