Deposit Plus
Helping wholesale investors and self-managed super funds combine
the benefits of investing at fixed and floating interest rates.
2 | Deposit Plus
The Commonwealth Bank is Australia’s leading financial institution, with total assets of more than $A933 billion (as at 30 June
2016). The Group is ranked 10th largest bank in the world by market capitalisation (Bloomberg, as at 22 August 2016) and is
one of the largest companies on the Australian Securities Exchange.
Our Institutional Banking and Markets division provides capital raisings, risk management and transactional banking solutions
to the Group’s institutional clients. Capabilities in Markets include foreign exchange, interest rate, commodity and fixed income
products. The division’s approach is underpinned by rich analytics, insights from industry experts, innovative technology and a
deep commitment to building long-lasting relationships.
The Commonwealth Bank Group is headquartered in Sydney, Australia and has a global presence throughout Asia, New
Zealand, the United Kingdom and North America.
IMPORTANT INFORMATION
The Deposit Plus is a deposit liability of Commonwealth Bank and a protected account for the purposes of the Financial Claims Scheme. The Financial Claims
Scheme, under the Banking Act 1959, covers AUD deposit amounts you hold in a bank in aggregate up to a statutory prescribed limit (please note for the
purposes of calculating this total, joint accounts are considered to be held in equal shares). You may be entitled to a payment in some circumstances. Payments
under the scheme are subject to a limit for each depositor. Information about the Financial Claims scheme can be obtained from the APRA website
at www.apra.gov.au and the APRA hotline on 1300 558 849 (if calling from within Australia) or + 61 2 9210 3480 (if calling from outside Australia).
This information is provided by Commonwealth Bank of Australia (the Bank) ABN 48 123 123 124 AFSL/Australian Credit Licence 234945.
The information in this document does not take into account your personal objectives, financial situation and needs. Before transacting in this product, you
should be satisfied that this product is suitable for you in view of those objectives, and your situation and needs, and we recommend that you consult your
investment adviser or obtain other independent advice.
The information in this document is subject to change from time to time and is current as at 27 July 2016.
Deposit Plus | 3
A flexible approach Why invest in the
to investing
Deposit Plus?
Standard term deposits offer investors safe, predictable
returns at a fixed rate of interest over the investment term.
However, if interest rates rise, these fixed returns can
become less attractive.
To help wholesale investors and self-managed super funds
(SMSF) manage this challenge, the Commonwealth Bank
has created Deposit Plus, which combines the certainty of
investing at fixed rates and the flexibility of floating rates to
help you manage your interest rate risk.
The Deposit Plus is a fixed term investment issued by
Commonwealth Bank where the total term is divided into two
periods, one in which you earn interest at a fixed rate and
one in which you earn interest at a floating rate.
You can choose:
1. the term of your Deposit Plus
2. the order and length of each fixed rate and floating rate
period; and
3. how you structure your interest return between your
fixed rate and floating rate periods, subject to agreement
by the Bank.
Product features
Minimum
investment
›› A$500,000 for wholesale investors
and A$100,000 for SMSF investors
Terms available
›› One to ten years or as otherwise
agreed by the Bank.
›› The total term is divided into two
periods, one in which you earn
interest at a fixed rate and one in
which you earn interest at a floating
rate.
Interest
payments
›› Interest is paid quarterly in arrears.
›› The fixed rate and fixed margin
(for the floating period) used to
calculate interest payments are set
on the deal date of your Deposit
Plus.
Greater flexibility than a standard
term deposit
The Deposit Plus gives you the best of both worlds. You
can divide your investment term between fixed and floating
interest rate periods to create your ideal combination of
certainty and flexibility.
By selecting a Deposit Plus, you could potentially earn higher
interest payments than standard at-call deposits because you
are agreeing to invest for a longer term.
The Deposit Plus is a hold to maturity investment and not an
at-call account. By investing in the Deposit Plus, your principal
remains invested until maturity.
Certainty of returns
The fixed rate and fixed margin that apply to your Deposit Plus
are agreed to and set on the deal date and remain unchanged
during the investment term. This means that during the fixed
interest rate period, you know exactly what interest payments
you will receive.
During the floating interest rate period, you gain a degree
of certainty as we combine the floating interest rate with a
pre-determined fixed margin above the bank bill swap rate
(BBSW). This reference rate is widely used in the Australian
market to price wholesale deposits and loans. For example, if
the agreed fixed margin is 0.80% and the three-month BBSW
is 1.75%, you will receive a return of 2.55% for the next three
months. However, you should note the BBSW will vary over
time, which may affect your returns.
Invest with a trusted institution
By investing with the Commonwealth Bank, you are choosing
one of Australia’s oldest and most trusted financial institutions.
Your funds are protected by the Australian Prudential
Regulation Authority’s Financial Claims Scheme, which offers
investors additional security and peace of mind.
4 | Deposit Plus
How the Deposit Plus works
Our Deposit Plus contains two different interest periods.
›› A fixed interest period where you are paid a fixed interest
rate. This is followed by a floating interest period where
you receive a floating interest rate made up of the relevant
BBSW for the term plus a pre-determined fixed margin.
Worked Example
This example is indicative only and the interest rates included
are not intended as a prediction or otherwise of future Interest
rate movements or levels.
›› A floating interest period where you are paid a floating
interest rate made up of the relevant BBSW rate for the term
plus a pre-determined fixed margin. This is followed by a
fixed interest period where you receive a fixed rate.
Each Deposit Plus is a stand-alone transaction. You can have
as many Deposit Plus as you would like and can enter Deposit
Plus whenever you want. The minimum term would usually be
one year or as otherwise agreed to by the Bank.
Your choice of interest rate periods
You select the fixed rate and floating rate periods, and the
order and length of each. For instance, for a five-year Deposit
Plus investment, you may select year one as a fixed interest
period, while years two, three, four and five would be floating
interest periods (see example on this page).
When setting interest rates, we reference the BBSW, which
is widely used in the Australian market to price wholesale
deposits and loans.
Greater flexibility in managing
returns
You can choose how you structure your interest return
between your fixed rate and floating rate periods, subject to
agreement by the Bank (see example on this page). This gives
you greater flexibility in managing your interest return.
During the fixed interest rate period, fixed rate interest
payments will not be affected by downward interest rate
movements. However, if interest rates rise, you will not receive
higher interest payments.
During the floating interest rate period, your interest payments
will vary with movements in the BBSW. However, your fixed
margin remains constant during the floating interest rate period.
“We would like to invest A$1,000,000 for a 5 year term. We
believe interest rates will fall in the first year and then rise after
that time. As such we would like a fixed rate in year one and
floating rates in years two, three, four and five. The Bank has
calculated a fixed rate of 3.25% p.a. and a floating rate of 3
Month BBSW + 1.10% p.a.
Deposit Plus | 5
Example interest payments
This worked example has been artificially adjusted the number of days in each quarter so each year contains 365 days with
interest paid quarterly.
All example calculations in the table above use this formula:
Interest Payment = Deposit Amount x Interest Rate x (Days / 365)
Quarter
Deposit
amount
Type of
interest
Fixed
margin
3 Month
BBSW
Interest
rate
Days in
quarter
Interest
payment
1
$1,000,000
Fixed
N/A
N/A
3.25%
91
$8,102.74
2
$1,000,000
Fixed
N/A
N/A
3.25%
91
$8,102.74
3
$1,000,000
Fixed
N/A
N/A
3.25%
91
$8,102.74
4
$1,000,000
Fixed
N/A
N/A
3.25%
92
$8,191.78
5
$1,000,000
Floating
1.10%
1.75%
2.85%
91
$7,105.48
6
$1,000,000
Floating
1.10%
1.50%
2.60%
91
$6,482.19
7
$1,000,000
Floating
1.10%
1.25%
2.35%
91
$5,858.90
8
$1,000,000
Floating
1.10%
1.00%
2.10%
92
$5,293.15
9
$1,000,000
Floating
1.10%
1.50%
2.60%
91
$6,482.19
10
$1,000,000
Floating
1.10%
1.75%
2.85%
91
$7,105.48
11
$1,000,000
Floating
1.10%
2.00%
3.10%
91
$7,728.77
12
$1,000,000
Floating
1.10%
2.25%
3.35%
92
$8,443.84
13
$1,000,000
Floating
1.10%
2.75%
3.85%
91
$9,598.63
14
$1,000,000
Floating
1.10%
3.00%
4.10%
91
$10,221.92
15
$1,000,000
Floating
1.10%
3.25%
4.35%
91
$10,845.21
16
$1,000,000
Floating
1.10%
3.25%
4.35%
92
$10,964.38
17
$1,000,000
Floating
1.10%
3.75%
4.85%
91
$12,091.78
18
$1,000,000
Floating
1.10%
4.00%
5.10%
91
$12,715.07
19
$1,000,000
Floating
1.10%
4.25%
5.35%
91
$13,338.36
20
$1,000,000
Floating
1.10%
4.75%
5.85%
92
$14,745.21
Fixed interest rate calculation (for example, in Quarter 1)
Fixed interest rate calculation (for example, in Quarter 14)
Deposit Amount
$1,000,000
Deposit Amount
Interest Rate (Fixed)
3.25% p.a.
Interest Rate
(Floating)
Days
Interest
91
A$1,000,000 x 3.25% x (91/365)
A$32,500 x 0.24931507
A$8,102.74
On the Maturity Date
$1,000,000
= 4.10% p.a. being the 3 Month
BBSW of 3.00% p.a. plus the
fixed margin of 1.10% p.a.
91
Days
Interest
A$1,000,000 x 4.10% x (91/365)
A$41,000 x 0.24931507
A$10,221.92
In this example on the Payment Date for Quarter 20 as per the table above, which is the Maturity Date, you will receive both your
last Interest payment of A$14,745.21 and your A$1,000,000 Deposit Amount back.
*These examples are indicative only. The interest rates we have included are not intended as a prediction or otherwise of future interest rate movements or levels.
6 | Deposit Plus
Making an informed decision
Important
Deposit Plus is not the same as standard Term Deposits
or At Call Deposits. Most importantly, Deposit Plus are holdto-maturity, fixed-term investments that can only be terminated
prior to maturity as agreed by Commonwealth Bank and
subject to you providing us with at least 31 days’ notice in
writing. If your investment is terminated early, the costs may be
significant and the Early Termination Value may be less
than your Deposit Amount (the amount originally invested),
which means you may suffer a loss. Any Break Costs required
to be paid by you will affect the Early Termination Value. Early
Termination may have tax consequences for you.
The cost to withdraw (also known as the Break Cost) is the
cost that the Bank estimates when you request termination of
your Deposit Plus prior to the Maturity Date (ie withdraw all the
Deposit Amount in Deposit Plus held with the Bank). The Bank
determines a reasonable estimate of the Bank’s costs, if any, in
replacing or terminating the finance provided by your Deposit
Plus investment.
The likelihood of incurring an early withdrawal cost will depend
on whether there has been an increase in the Bank’s funding
costs.
The main factors that influence funding costs are:
›› liquidity in the financial markets
›› market pricing of credit risk
›› the time remaining until your investment’s maturity
›› present value factors.
The Bank will apply the termination adjustment amount to your
Deposit Amount to calculate your Early Termination Value. As
the cost is influenced by market conditions, the Bank cannot
provide certainty regarding the amount of the Break Cost until
the date of your Early Termination request. During the global
financial crisis in 2008, for example, the cost of borrowing for
banks rose substantially, mainly due to the rapid rise in credit
spreads and low liquidity in global financial markets.
Using a number of assumptions the Bank has estimated that
the costs impact if credit conditions changed from current
levels and returned to those at the height of the global financial
crisis in 2008 after one year of investment. Under those
conditions, an early termination from Deposit Plus would
have resulted in a cost of approximately 1% per annum of the
Deposit Amount for the remaining term to maturity (please
see “Early Termination Worked Example” below for more
information).
If we agree to terminate your Deposit Plus prior to the Maturity
Date, we will provide you with an indicative termination quote
that sets out the estimated Break Cost, accrued Interest, the
Early Termination Value and how long the indicative termination
quote will remain valid. The Early Termination Value is your
Deposit Amount, plus or minus the Break Cost. Accrued
Interest is paid in addition to the Early Termination Value.
Depending on the circumstances, the costs may be significant,
insubstantial or be of economic benefit to you.
If you accept the indicative termination quote, and notify us of
your acceptance, we will agree to process your request. The
Deposit Plus investment will be terminated, and your Deposit
Amount (plus or minus the Break Cost and including any
accrued Interest) will be returned to you on day 32. For the
avoidance of doubt you will receive Interest on your investment
during the 31-day notice period. Payment may be effected on
an earlier date where You are the trustee of a Self-Managed
Superannuation Fund in cases of financial hardship as agreed
with the Bank.
You cannot make a partial withdrawal of your Deposit Amount
or request a partial Early Termination from Deposit Plus.
Early Termination worked
example
You invested $500,000 in a Deposit Plus on 30 November
2014, with a Maturity Date of 30 November 2019. On 14
November 2016, you request an Early Termination. We agree
to an Early Termination and (for the purpose of this example)
determine that the termination adjustment amount (Break
Cost) is A$4,500 p.a.
The Bank will apply the Break Cost to your Deposit Amount
based on the time remaining until the Maturity Date (three
years in this example). That is:
$4,500 × 3 = $13,500
Please note that the Break Cost is applied to the Deposit
Amount. What you receive as your Early Termination Value is
equal to $500,000 − $13,500 = $486,500. The Bank will also
pay any accrued but unpaid Interest for the broken Interest
Period. You will receive the Early Termination Value on 16
December 2014, being 32 days after 14 November 2014, when
we agreed to your request for Early Termination.
As shown, it is possible that you may receive back an Early
Termination Value that is less than the initial Deposit Amount
invested. Please note that figures are provided as an example
only and should not be used as a guide to the size of the Break
Cost at any particular time.
If you decide to invest in Deposit Plus, you should do so
intending to hold to maturity and should not invest funds
you will require for other purposes during the Term of your
investment.
Deposit Plus | 7
Interest rate risk
Interest rates may not move as you expect. For example if
BBSW falls during the Term of your investment your interest
return will also fall and may be inferior to that of similar
investments.
How to apply
Wholesale investors
Credit Risk
›› Please contact your Markets Dealer or Relationship
Manager.
Reinvestment Risk
›› If you decide to proceed, your Markets Dealer or
Relationship Executive will provide you with the Indicative
Term Sheet, Global Fixed Income Deposit Terms and
Conditions, and Appendix 2 for you to read and sign.
The risk that Commonwealth Bank does not or cannot meet its
obligations to you under the terms of Deposit Plus.
The risk that the proceeds from the payment of Deposit
Amount and interest payments might have to be reinvested at a
lower rate than the original investment.
Operational risk
You are reliant on the ability of Commonwealth Bank to price
and settle your Deposit Plus in a timely and accurate manner.
Should a Commonwealth Bank operational process fail you
may suffer losses or experience delays in payment.
Change of law
There is a risk that any change in taxation, corporate or other
relevant laws, regulations, interpretation or rules may adversely
affect your investment.
Potential conflicts of interest
›› If Commonwealth Bank accepts your application, you
can invest in one or more Deposit Plus investments with us.
›› The terms of Deposit Plus investments can vary, so it is
important that you read the relevant Indicative Term Sheet,
the Global Fixed Income Deposit Terms and Conditions,
and Appendix 2 before you invest.
›› There is no cooling-off period for a Deposit Plus investment.
SMSF investors
›› Please contact your financial adviser to determine whether
a Deposit Plus investment suits your needs and objectives,
and the investment strategy you have set for your SMSF.
We and our related bodies corporate may conduct transactions
as principal and as agent in various financial instruments
used to price Deposit Plus. These trading activities may affect
(positively or negatively) the market price of your Deposit Plus.
›› If you decide to proceed, please read the Product Disclosure
Statement (PDS) and sign the Global Fixed Income Deposit
Terms and Conditions, and Appendix 2, then return them to
your financial adviser, who will contact us.
Market disruption
›› You can then invest in one or more Deposit Plus
investments with us by contacting your financial adviser.
If BBSW is not available we will use the buying rate quoted by
Commonwealth Bank at or about 10.30am (Sydney time) on
the first day of the Interest Period for bills of exchange accepted
by a leading Australian bank and which have a term equivalent
to the period.
Fees and charges
There are no fees payable to establish or maintain your Deposit
Plus, although you should be aware that you may incur Break
Cost if you request termination of your Deposit Plus investment
prior to the Maturity Date and this may impact your Early
Termination Value.
›› The terms of Deposit Plus investments can vary, so it is
important that you read the relevant Indicative Term Sheet,
the PDS, the Global Fixed Income Deposit Terms and
Conditions, and Appendix 2 before you invest.
›› There is no cooling-off period for a Deposit Plus investment.
Investor
Sales Team
Through our commitment to expertise,
education and adopting new technologies, we
give you control and certainty when dealing
with fixed income investments.
Expertise – We have more than 20 years of
experience in financial markets, so we can
explain fixed income investments to you in
simple terms. We aim to create and maintain
strong relationships with you.
Education – We can provide guidance
on how fixed income investments fits into
your portfolio, so you can be confident about
investing with us.
Technology – We are committed to
regularly integrating new technology from
the advice industry.
If you are a wholesale client or SMSF looking
for alternatives to term deposits, please
call us on:
NSW, ACT, Qld, WA: 1300 723 189
Vic, Tas, SA, NT: 03 9675 7584
CBA3333 080816