Although interest rates have plummeted on savings accounts in the last few years, term deposits are still a popular option for many savers. The safeguard that they can still access their funds immediately means that consumers are often happy to ‘lock away’ their funds in return for a better interest rate.
However, changes to term deposit conditions made under the Basel III reforms to improve the liquidity coverage ratio of financial institutions – i.e. the amount of cash and assets which can be liquidated – may catch consumers unaware. Banks can now request that customers wishing to access funds in fixed cash accounts before the date of maturity give 31 days’ notice. This means that should you need to immediately access the cash in your term deposit, you can’t unless you can prove you are experiencing extreme financial hardship.
While existing accounts are exempt from the changes, you will have to be careful if you renew or open a new account. This means that when your bank writes to you to inform you that your account is approaching maturity and you do nothing, it will simply be renewed with the new rules applied.
If you hold a term deposit, or similar type of fixed cash account, your financial institution should have contacted you to advise you of the change. If you have not received any notice, you should contact them and ask to be updated on the bank’s position.
