Is My Money Safe in an Australian Bank? What Happens If a Bank Fails

In March 2023 three US banks failed in a single week, and Credit Suisse had to be rescued days later. Derek Whitaker explained on The Greater Wealth what went wrong, and what it means for money sitting in an Australian bank.

In this episode (12 chapters)

1. 00:00Introduction
2. 01:58Three US banks in one week
3. 03:04Banking runs on trust
4. 03:31The day the bank ran out of cash
5. 04:02Why Silicon Valley Bank failed
6. 05:03Bonds, and why rising rates hurt them
7. 06:28The run: "we want our money, we want it now"
8. 08:23The US$250,000 guarantee
9. 09:36Silvergate and the crypto banks
10. 20:39What it means for Australians
11. 22:10Being prepared
12. 30:38Opportunity in turbulent times

Derek's view

When Silicon Valley Bank failed, Derek told The Greater Wealth the real issue wasn't money but confidence:

"I think banking is all based on people's trust. And when that trust is breached, they hit panic mode. And this is why banks are absolutely terrified about a run on the bank."

He's also careful not to frighten anyone:

"I'm not saying, hey, all your money is vulnerable in Australian banks and all this sort of stuff. I'm not saying that."

Is my money safe in an Australian bank?

Up to a limit, yes. Australia's Financial Claims Scheme (FCS), run by APRA, protects deposits "up to $250,000 for each account holder at each bank, building society and credit union." It was set up during the 2008 global financial crisis and has to be switched on by the Australian Government if a bank fails. APRA says it "will endeavour to pay account holders within seven calendar days."

Three limits are worth knowing:

1. It covers deposit accounts. APRA's list includes savings, transaction, term-deposit and mortgage offset accounts. Investments such as shares aren't deposits, and accounts held in foreign currencies aren't covered.
2. It's per person, per institution, and brands can share one limit. Two accounts at the same bank share one $250,000 limit. APRA warns that some banks trade under more than one name: "BankWest is part of the Commonwealth Bank, while St George is part of Westpac."
3. It only covers banks incorporated in Australia and authorised by APRA. APRA's Deposit Checker shows whether an account is covered.

How does the $250,000 guarantee work for joint accounts?

APRA splits a joint account equally between the holders, then adds each person's share to any other deposits they hold in their own name at the same institution. Its own example: Peter and Alex share a $300,000 joint account, and Alex also has $50,000 in his own name. Peter is covered for $150,000, and Alex for $200,000.

Can Australian banks collapse?

Any bank can fail, which is why the guarantee exists. Australia's banks are tightly regulated by APRA, and Derek's view in March 2023 was measured:

"I think we've got to realize the Australian banking sector is very different from the American banking sector… However, my concern is the ripple effect of what happens."

His concern was how connected the system is: big investment funds, super funds and banks around the world all hold each other's shares and bonds, so a failure in one country can reach others. And his caution: "I don't want to talk it up and put fear on people."

What happened to Silicon Valley Bank?

Silicon Valley Bank was closed on 10 March 2023, and Signature Bank two days later. Derek explained why on air that week. SVB was full of deposits from tech start-ups, and it put much of that money into bonds:

"They started buying into a lot of US Treasury and mortgage-backed securities. In other words, bonds… It sounds safe because it's government-backed."

Then the US Federal Reserve raised interest rates, and bond prices fell:

"As they're hiking up rates, the bonds aren't worth what they used to when they bought them originally."

On 8 March, SVB announced a US$1.8 billion loss on selling securities to raise cash. According to the Federal Reserve, depositors then pulled "more than $40 billion" in a single day. By the next morning the bank was gone. The US government later protected all SVB and Signature depositors, even above the US$250,000 insured limit, using a "systemic risk exception". Shareholders and some bondholders were not protected.

Derek had seen a tiny version of a run years earlier, when an employer missed the pay deadline and wrote everyone cheques. The whole staff went to the same bank at lunchtime, and the teller ran out of cash: "It was funny to watch a bank have cash flow issues. This is on a bigger level, though, and it's pretty serious."

What are unrealised losses, and why do they matter?

Derek's explanation, two weeks later:

"Let's say you buy a stock and you buy it for $20. The market goes down to $15. You have an unrealized loss of $5… because you haven't sold it."

A bank holding bonds that have fallen in value is fine until depositors want their money and it has to sell. The US deposit insurer, the FDIC, put US banks' unrealised losses on securities at US$620.4 billion at the end of 2022. By mid-2026 they were still US$326.7 billion.

Can an Australian bank freeze your account?

Yes. Banks can block or freeze accounts under their terms and conditions and under the law, for example over suspected fraud or money-laundering checks. Derek knows this first-hand:

"I had my bank accounts frozen in 2023."

It took him six months through the Australian Financial Complaints Authority (AFCA) to resolve. The Banking Code of Practice says that if you can't resolve a complaint with your bank, "you can make a complaint to AFCA", and "AFCA decisions are binding" on the bank. More on what that experience taught him in What Is the Great Wealth Transfer?

It's also why he keeps coming back to a question he raised on air in 2023: people are starting to ask "who's in control of my money? Who's in control of my wealth?"

Can Australian banks take your deposits in a "bail-in"?

This worries a lot of people, so here's what the law says. In 2018 Parliament passed the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act. It lets an instrument be converted into shares or written off, but only an instrument "that contains terms" allowing it. In practice that means the hybrid securities banks sell to investors, known as Additional Tier 1 and Tier 2 capital. An ordinary deposit account has no such terms, and deposits up to $250,000 are protected by the FCS.

Critics point out that the Act also mentions "any other instrument", and argue that leaves the door open. That's their reading, not what has happened: no Australian deposit has been converted under the Act.

What a write-off looks like in practice: when UBS took over Credit Suisse in March 2023 for CHF 3 billion, Swiss regulators wrote off about CHF 16 billion of Credit Suisse's AT1 bonds to zero. Depositors were not touched. In October 2025 a Swiss court ruled that the write-off had been unlawful.

How do you protect your money from a bank failure?

Derek frames it as being prepared rather than afraid: "The old Boy Scout be prepared." Four ideas come up again and again when he teaches it:

1. Understanding the guarantee. Many people don't know the $250,000 limit applies per person, per institution, or that two brands can belong to one bank.
2. What happens if the system goes down. He asks: "If Perth or one of the capital cities in Australia was hit by a storm… and the grid goes down, do you have enough cash to buy supplies… for a week or two?" More on that in Governments Say Stock Up. Your Emergency Kit Is Missing One Thing.
3. Different kinds of reserves. He talks about not relying on one place for everything, and about the practical side of holding reserves: "What you do have to consider if you're going to do that is storage and the securities around that."
4. Income from more than one source. His point is that a failure in one industry can ripple into jobs in another, which is one reason he encourages people to think about building something of their own.

What's right for your situation is a question for a licensed adviser.

Where can Australians learn how to protect their money?

Blu Sky Factory, founded by Derek Whitaker in Perth, teaches financial education for Australians from a Christian perspective: how money and the banking system work, how to prepare for change, and how to build and keep wealth. Its free masterclass, The Day I Found Out My Money Wasn't Mine, starts from Derek's own experience of having his bank accounts frozen in 2023. Blu Sky Factory provides education, not personal financial advice, and doesn't recommend any bank or product.

Three questions to ask yourself

1. If your bank froze your account tomorrow, how long could your household manage?
2. Do you have more than $250,000 at any one bank, building society or credit union?
3. Who's in control of your money, and how much of it could you reach in a week?

Education only. Nothing here is personal financial, tax or legal advice.

Education only. Nothing here is personal financial, tax or legal advice.