Key Points:

National supports the Government's plans to offer a guarantee of $150 billion in retail banking deposits, but says there still many unknowns about how the scheme will work.

National leader John Key was briefed by Reserve Bank Governor Alan Bollard this afternoon about the plan after the Government announced the policy at the Labour Party campaign launch.

New Zealand's four major banks have said they want to be in the scheme and a number of smaller banks such as KiwiBank have said they will apply.

Mr Key said he was comfortable the scheme would work with its broad thrust, but said there were still unanswered questions and possible changes to the scheme to be cleared up.

These included extending the coverage of wholesale deposits as was being offered in Australia and some possible unintended consequences.

Mr Key said he was unhappy he had not been briefed prior to the announcement yesterday.

"I sought an assurance that if there were to be future changes, particularly taking into consideration wholesale lending, I will be briefed prior to that announcement and... Alan Bollard said to me that would be at the discretion of the minister, as it was yesterday," Mr Key said.

United Future criticised Labour for making its decision to introduce the scheme unilaterally.

"This is not a not a political issue, this is an issue that is a New Zealand issue that all parties should have been involved in because this transcends the life of this particular government or the next government," leader Peter Dunne said.

"To try to make it a particular issue was a very short-sighted and damaging move."

But Finance Minister Michael Cullen said today he had to move quickly yesterday because he had been working with Australian ministers and needed to make the announcement at the same time as they did about their own guarantee scheme.

"I gave approval for a briefing to be given to Mr Key and Mr English but that was late in the day," he said.

Mr Key said that Dr Bollard had acknowledged that National had taken a cautious approach to the banking system in New Zealand and had not tried to turn it into a political sideshow.

National could have gone out last week and called for such a scheme but that could have caused a panic that the banks were in trouble.

"That would have been reckless," Mr Key said.

The Reserve Bank had said up to 200 entities could enter the scheme, he said.

The large well known organisations would be approved quite quickly but others could be more questionable.

The Reserve Bank had told them it would monitor trustees of financial institutions holding a guarantee to ensure they did not inappropriately lend.

It would raise confidence amongst customers but it could have some downsides.

For instance there would now be finance companies and banks offering differing levels of interest but both with a government guarantee.

The Reserve Bank had told him that the guarantee had to be offered to everyone as otherwise it could see money flow out of those not allowed into the scheme.

The five banks have now joined up with the Government's new deposit guarantee scheme, with the BNZ also saying it intends to join.

ASB Bank was the first of the big retail banks to say it would take part, with Government-owned Kiwibank also joining in early.

This was followed by Westpac and newly registered SBS. ANZ National, the largest of the NZ banks, will also take part.

"ANZ National is strong, well-capitalised and holds a AA credit rating from Standard & Poor's, putting it amongst the most highly-rated banking groups in the world" said bank chief executive Graham Hodges.

"As Governor Bollard reiterated last week, the New Zealand banking system is fundamentally sound" he said.

"However this guarantee scheme sends an important signal to New Zealanders and we're pleased to offer this reassurance to our customers who are understandably concerned by the impact of the global uncertainty."

"Most of the developed countries in the world now offer deposit guarantee schemes", said ASB in a statement issued this morning.

"The New Zealand Deposit Guarantee Scheme will provide additional assurance to our customers that their deposits are safe in these uncertain times."

ASB, part of the Commonwealth Bank of Australia, pointed out it was part of one of only 20 banking groups in the world with a Standard & Poor's credit rating of AA Stable or better.

"The scheme means that under all circumstances, customers can be certain that they will get access to their deposits plus interest," said Kiwibank chief executive Sam Knowles.

Westpac New Zealand issued a statement this afternoon saying it too will opt into the proposal.

"Westpac New Zealand will engage with the Minister and the Reserve Bank to work through the detail required to put an effective guarantee scheme in place," said acting chief executive Bruce McLachlan

He said Westpac New Zealand "supported the approach of reassuring New Zealanders and understood the pressure to act given similar moves around the world".

A BNZ spokesman said: "We welcome the scheme and our intention is to "opt-in".

New Zealand's newest bank, SBS (the Southland Building Society), which gained its banking licence just last week, says it too is joining the scheme.

SBS general manager finance Tim Loan said it would provide New Zealand depositors greater assurance that their deposits are safe.

"We have a proven track record of success as a result of our ongoing prudence, conservatism and 139 years of banking know-how and experience. However, the current world financial crises means there will be still be some people who feel uneasy about the stability and security of financial institutions," he said.

The bank had seen investments "flood in" over the past three days, said Loan, "signalling the level of security people associated with New Zealand bank status".

The Government's move to introduce a deposit insurance scheme, which mirrors one made by Australia's Labour Government, is intended to stop panic withdrawals in response to the international financial crisis.

As well as mainstream trading banks, the guarantee covers savings with credit unions, building societies, finance companies that take deposits, and cash portfolio investment entities sponsored by covered institutions.

It is free for banks with deposits up to $5 billion but a fee will be charged on deposits over that amount.

Prime Minister Helen Clark made the announcement at the launch of the Labour Party election campaign in Auckland yesterday.

Mr Key last night welcomed the move.

"While New Zealand's banking system continues to be sound, with international moves including that by Australia to implement a deposit guarantee system, this is an inevitable and sensible step."

He added that National "would expect the Government to set up a fully bipartisan process for thrashing out the details".

Detailed spending plan

Announcing the scheme yesterday, Helen Clark also outlined a detailed spending plan to stimulate the economy if a worsening economic downturn warrants it.

It includes bringing forward planned infrastructure spending and building projects such as school property upgrades, and support for back-country reafforestation.

Projects such as extending the rail line from Whangarei to Marsden Pt and work at specific schools have been identified.

Helen Clark said a mini-Budget would be produced in December if Labour won the November 8 election.

She said it was important to show leadership "so that a financial crisis overseas doesn't lead to depression in New Zealand, with widespread unemployment".

All Labour's planned moves would result in extra jobs.

Helen Clark also announced an allowance that would finance retraining for people who had been in the workforce for more than five years and had been made redundant.

In her conference speech, the PM blamed the "greed" of the money markets for the crisis.

"A curtain is being drawn on the era of the free-wheeling unregulated money traders and financiers whose greed has shaken the international financial system to its core," she said.

"Co-ordinated international action will be needed to ensure that the greed merchants don't ever again get the chance to destroy the lives of ordinary people in real jobs trying to put foodon the table for their families."

She has been in talks with Australian Prime Minister Kevin Rudd over the deposit guarantee scheme. Canberra said yesterday that it would guarantee all bank deposits for three years, and would not charge a fee.

Dr Cullen agreed that victims of finance company collapses might feel a bit aggrieved but said: "Life has moved on since then in terms of people need assurance on their deposits across a broad range of institutions."

He said there was no evidence of risk in any New Zealand institution, and none was expected.

But New Zealand would have been the only country in the world not giving such a guarantee.

"There are other announcements going on around the world, which means that if we did not do something there was a risk that people might feel slightly jittery."

What is a deposit guarantee scheme?

The Government is guaranteeing people's full deposits in various institutions, meaning that if a qualifying institution goes into liquidation, depositors will be able to get their money out. Banks and other qualifying institutions will contract into the scheme, which will run for two years.

What institutions does it cover?

All retail deposits in participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities, including building societies, credit unions, deposit-taking finance companies and cash PIEs (portfolio investment entities) that are sponsored by qualifying institutions.

Will it cost anything?

The Government covers an institution for no fee up to $5 billion in deposits. Larger institutions will be charged a fee of 0.1 per cent above that. So a bank with $20 billion in retail deposits will pay $15 million a year in fees, and that could be passed on to customers.

Will it cost the Government anything?

It will add about $150 billion to the Crown's books as a contingent liability but the Government is adamant that New Zealand's banks are sound, so there is no danger that it will have to pay out.

How big are the bank deposits?

The smallest trading bank is Kiwibank with a little over $5 billion. The big four - Westpac, ANZ-National, BNZ and ASB - have deposits in the order of $30 billion to $40 billion each.

- AUDREY YOUNG, NZPA, NZHERALD STAFF