Depositor Protection and Bank Liquidity Regulation: Distortions Affecting Superannuation

9 Pages Posted: 24 Mar 2020

See all articles by Kevin Thomas Davis

Kevin Thomas Davis

University of Melbourne - Department of Finance; Australian Centre for Financial Studies

Rodney Maddock

Monash Business School; Victoria University - Victoria University of Technology

Date Written: June 2019

Abstract

This article explains why short‐term bank deposits, made on behalf of members by institutional superannuation funds, receive a substantially lower interest rate than deposits made directly by individuals and self‐managed super funds. We estimate the potential negative effect on the ultimate retirement savings of those members. We show how extending the Financial Claims Scheme to provide coverage to such deposits on a ‘look through’ basis would remove that inequity and should, in principle, remove the rationale for the payment of lower interest rates. We consider the political arguments against extending the scheme and argue that these are of limited merit.

Suggested Citation

Davis, Kevin Thomas and Maddock, Rodney, Depositor Protection and Bank Liquidity Regulation: Distortions Affecting Superannuation (June 2019). Australian Economic Review, Vol. 52, Issue 2, pp. 149-157, 2019, Available at SSRN: https://ssrn.com/abstract=3557379 or http://dx.doi.org/10.1111/1467-8462.12321

Kevin Thomas Davis (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Business and Economics
Parkville, Victoria 3010 3010
Australia
+613 8344 5098 (Phone)
+613 8344 6914 (Fax)

Australian Centre for Financial Studies ( email )

Level 46, 525 Collins St
Melbourne, Victoria 3079
Australia

Rodney Maddock

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Victoria University - Victoria University of Technology ( email )

P.O. Box 14428
Melbourne City, Victoria 8001
Australia

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