Bank customers' fears about the safety of their savings as the credit crisis gathered momentum were a big factor in the Government's move to guarantee bank deposits, Reserve Bank Governor Alan Bollard said yesterday.
He acknowledged that the Reserve Bank had deliberately kept a low profile as the credit crisis spread across overseas markets and economies.
"We've felt it was not the time to stand up and make a big fuss about that, but we did start to get more intelligence from the banks about needing to think about these sorts of things.
"People weren't taking money out of the banks but they did get a lot of inquiries."
Dr Bollard said the Government had asked the Reserve Bank and the Treasury last week to draft a blueprint for a deposit guarantee scheme.
That paper was delivered on Friday night, as the Government and the bank began to receive calls from their Australian counterparts about a similar scheme, which Canberra unveiled on Sunday, the same day as Prime Minister Helen Clark announced New Zealand's plan at an election rally.
"Inevitably there was a little bit of co-ordination and some attempt to ensure our scheme lined up against theirs," Dr Bollard said.
Before the announcement by Helen Clark on Sunday, there were fears that New Zealand customers would shift cash from local banks across the Tasman if Canberra was to introduce some kind of deposit protection and Wellington did not.
But once the decision was made to go ahead, Dr Bollard said, it was important it was done "early enough and big enough to stick".
He conceded that the swiftly drafted scheme would give rise to a number of potential problems including "boundary issues" concerning exactly what qualified as a deposit and would therefore be covered.
By last night ASB, Westpac, Kiwibank, ANZ-National, BNZ and Southland Building Society, which gained a banking licence only last week, said they would opt in to the scheme, as did ANZ-owned finance company UDC Finance.
While the big four Australian banks have professed their support for the scheme, the Herald understands there is some dissatisfaction that it will see them cross-subsidise smaller institutions, including finance companies and Kiwibank.
Under the scheme, banks will be charged a fee of 10 basis points on deposits of more than $5 billion.
"How much is Kiwibank's deposit figure?" said one major bank source. "$4.7 billion."
Australian media commentators have been more blunt, labelling the scheme a tax on the Australian banks "to bail out any smaller New Zealand finance companies that fail".
Until Sunday's announcements, New Zealand and Australia had been the only two countries in the OECD without some form of deposit insurance or guarantee.
The Reserve Bank's previous position was that such insurance or guarantees were counter-productive and created a "moral hazard" where the knowledge that the Government would clean up the mess should a bank fail encouraged risk-taking by institutions.
Critics of the Reserve Bank's previous stance argued that there was an implicit Government guarantee for the New Zealand Post-owned Kiwibank anyway and that the Government bailout of the Bank of New Zealand in 1990 - which cost $635 million - had also probably fuelled expectations that it would not allow any systemically important bank to fail.