The federal government's plan to set the new deposit guarantee cap at $100,000 would result in a significant redistribution of deposits across the self-managed superannuation fund sector (SMSF), financial services firm Dixon Advisory has claimed.
In its submission to the government's Financial Claim Scheme, the financial services firm said the new cap should be set at the highest level of $250,000, otherwise the $100,000 level would force savers to restrict their deposit exposure at non-big-four banks to the limit of the government guarantee.
"Specifically, based on an analysis of our 3900 funds, we believe a reduction in the cap level to $100,000 would result in deposit redistributions across our client base of up to $187 million for all non-big-four banks, including up to $112 million across regional banks, building societies and credit unions," Dixon said.
The firm said its client base provided a strong representative sample of the Australian SMSF population, and the results of its in-house analysis could be expected to be representative of the broader $420 billion SMSF industry.
"Therefore, at the $100,000 cap level, and with our number of funds under advice and administration representing just under 1 per cent of the entire SMSF sector, our analysis indicates there would be a very significant redistribution of deposits held in non-big-four and smaller authorised deposit-taking institutions (ADI), potentially in the order of several billion dollars, across the SMSF sector alone," it said.
"Even at the higher $250,000 cap level, there would still be a significant redistribution of SMSF deposits across non-big-four ADIs. Using the same analysis at the $250,000 cap level, across our client base we estimate deposit redistributions would be up to $120 million across all non-big-four ADIs, including up to $73 million across regional banks, building societies and credit unions."
The firm said it was impossible to state how much of the redistributions would represent net withdrawals of funds from smaller ADIs towards the big four as opposed to redistributions within and among smaller ADIs.
However, it said considering the potential magnitude of the redistributions, almost certainly a material sum would benefit the big four and reduce the ability of smaller ADIs to compete effectively.
