AUSTRALIA’S big banks plan to launch a range of “guaranteed” accounts to defend their bulging deposits under the Federal Government’s support scheme.

The major banks, particularly Commonwealth Bank, face big outflows of deposits when the three-year guarantee scheme takes effect on November 28.

An outflow would threaten the funding positions of big banks, which have become more dependent on deposits to fund their lending.

The importance of deposits has increased as offshore credit markets have tightened.

Under the Government’s deposit scheme, only the first $1 million of a customer’s money with an institution will be guaranteed free.

However, if a customer with, say, $10 million spreads the money equally across 10 institutions, all of those deposits will secure free protection.

The prospect of wealthy depositors spreading their money across the banking system has led to a swathe of smaller institutions taking market-leading positions in the term deposit market.

To counter the potential for a massive outflow of deposits later this month, the Commonwealth Bank confirmed it was looking at introducing special “guarantee-style accounts”.

The accounts would be priced at a discount rate or include a special fee to cover the costs of guaranteeing deposits of more than $1 million.

“We are looking at offering a guarantee-style product for our customers,” said CBA spokesman Bryan Fitzgerald.

According to online financial broker, FIIG Securities institutions such as Bank of Queensland, Elders Rural Bank and Bankwest are making an aggressive pitch for customers with more than a $1 million ready to deposit.

“If you’ve got over $1 million we think it only makes sense for you to spread your money across a number of financial providers to capitalise on the guarantee,” said FIIG’s head of research Justin McCarthy.

“Lots of banks need more deposits to fund their lending at the moment because some wholesale funding markets remain frozen.”

Major banks say they are continuing to encounter difficulty raising funds for terms beyond 12 months.

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