The risk that building societies and credit unions will lose large deposits because of their treatment under the government's deposit guarantee scheme is an unknown quantity, according to an industry analyst.KPMG financial services partner Martin McGrath said yesterday that his group had been unable to verify speculation that a number of small institutions had significant amounts of deposits over $1 million that would migrate to other credit unions, or banks, once the guarantee came into effect late this month.Non-rated approved deposit-taking institutions will have to pay a premium of 80 basis points over AA rated banks to offer a guarantee to customers with more than $1 million on deposit.Some credit unions and building societies have relationships with local councils, hospitals and other organisations that are attractive sources of large deposits. McGrath said: "We have spoken to a number of parties, including Abacus, but we have not been able to get figures."No one really knows, but our sense is that it would not be significant."The other thing is that we still don't have the detail of how the system will operate. But it is likely that a customer with a large deposit could waive the right to a guarantee and avoid the fee."This newsletter's credit union sources provide a mixed picture. In many cases retail deposits with low average values make up the bulk of a credit union's deposit base.There may be enough credit unions, though, each of whom are relatively large credit unions (by the sector's standards), where one aspect of their deposit strategy is framed around long term relationships with councils and similar organisations.In aggregate these deposits may comprise a material percentage of their deposit base.These is also some unease among smaller banks (and which also have lower credit ratings) over the merit in the analysis by the financial regulators that suggests that deposits of more than $1 million comprise no more than 0.5 per cent of the deposit base of banks. If those councils follow the advice of, say, Fixed Income Investment Group, to reduce deposits with any one institution to $1 million and to make deposits at the highest possible yield as long as the ADI has a government guarantee, then there may be a number of credit unions with significant dilemmas in managing their liabilities over the next few weeks.Another headache for the sector is that credit unions and building societies are obliged to invest liquid assets in other ADIs, and in practice with highly rated banks.Thus a credit union collecting deposits of more than $1 million will pay an insurance fee of 150 basis points and reinvest the funds in an institution paying an insurance fee of 80 basis points.This will either crunch an institution's deposit margins or act as a further incentive to forgo large deposits.