This is just a thought experiment.
The start of the taxpayer-guaranteed Deposit Compensation Scheme (DCS) is now less than 130 days away.
Then, at least 26 qualified institutions will be covered, so that depositor balances are protected to $100,000.
They aren't fully risk-free. Only Treasury's Kiwi Bonds are.
A DCS covered institution can still fail. Depositor balances are protected to $100,000 but probably not the accrued and unpaid interest. And there will be a wait to recover the funds while the authorities work through the specific issues of any failed institution. But the recovery for depositors will likely be relatively prompt.
Given all this, here is a thought experiment: What return would you earn if you invested the maximum $100,000 in a one year term deposit at each DCS covered institution?
This isn't to say that investing $2.6 million in term deposits is a wise investment. It is only a working example.
The bottom line: you would earn a 4.90% gross return. And that is better than any term deposit at a main bank.
| Credit | Gross | |||||
| February 22, 2025 | Rating | 1 yr | Investment | interest | ||
| % | $ | earned | ||||
| Main banks | ||||||
| ANZ | AA- | 4.20 | 100,000 | 4,200 | ||
| ASB | AA- | 4.30 | 100,000 | 4,300 | ||
| BNZ | AA- | 4.50 | 100,000 | 4,500 | ||
| Kiwibank | A | 4.25 | 100,000 | 4,250 | ||
| Westpac | AA- | 4.40 | 100,000 | 4,400 | ||
| Kiwi Bonds. 'risk-free' | AA+ | 3.75 | 100,000 | 3,750 | ||
| Other banks | ||||||
| Bank of China | A | 4.70 | 100,000 | 4,700 | ||
| China Constr. Bank | A | 4.65 | 100,000 | 4,650 | ||
| Co-operative Bank | BBB+ | 4.50 | 100,000 | 4,500 | ||
| Heartland Bank | BBB | 4.65 | 100,000 | 4,650 | ||
| ICBC | A | 4.80 | 100,000 | 4,800 | ||
| Rabobank | A | 4.55 | 100,000 | 4,550 | ||
| SBS Bank | BBB | 4.60 | 100,000 | 4,600 | ||
| TSB | BBB+ | 4.40 | 100,000 | 4,400 | ||
| Non-Bank Deposit Takers | Rating | 1 yr | ||||
| Community institutions | ||||||
| First Credit Union | BB | 4.70 | 100,000 | 4,700 | ||
| Heretaunga Bldg Society | 4.70 | 100,000 | 4,700 | |||
| Nelson Building Society | BB+ | 4.20 | 100,000 | 4,200 | ||
| Police Credit Union | BB+ | 4.55 | 100,000 | 4,550 | ||
| UnityMoney | BB | 4.45 | 100,000 | 4,450 | ||
| Wairarapa Bldg Society | BB+ | 4.75 | 100,000 | 4,750 | ||
| Finance companies | ||||||
| Christian Savings | BB+ | 4.85 | 100,000 | 4,850 | ||
| Finance Direct | 6.50 | 100,000 | 6,500 | |||
| General Finance | BB | 6.25 | 100,000 | 6,250 | ||
| Gold Band Finance | BB- | 6.40 | 100,000 | 6,400 | ||
| Liberty Financial | BBB | 5.50 | 100,000 | 5,500 | ||
| Mutual Credit Finance | B+ | 6.50 | 100,000 | 6,500 | ||
| Xceda Finance | B+ | 6.00 | 100,000 | 6,000 | ||
| All institutions above | 4.92 | 2,600,000 | 127,850 | |||
| All DCS covered institutions | 4.87 | 2,700,000 | 131,600 |
Adding Kiwi Bonds takes 5 bps off the option.
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