Bank Bail-In

Ipv6Ready said:
When was the last time a big four bank got a bail in Australia?
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I'm not sure it's ever happened?
But why did the government bring in the law this year if they thought it wasn't a possibility that a bank could fail and they'd rather have the creditors (us!) bail them out?
 
SilverDJ said:
I'm not sure it's ever happened?
But why did the government bring in the law this year if they thought it wasn't a possibility that a bank could fail and they'd rather have the creditors (us!) bail them out?
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Maybe not the 'big four', but there's the 1990 example of Pyramid Building Society taking 49% of deposits. Depositors received 51 cents per dollar which took 15 years to be returned (final cheques sent in 2005).

Look at how the government guarantee worked in this case.
 
willrocks said:
Maybe not the 'big four', but there's the 1990 example of Pyramid Building Society taking 49% of deposits. Depositors received 51 cents per dollar which took 15 years to be returned (final cheques sent in 2005).

Look at how the government guarantee worked in this case.
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Is that a bail in?... that is just a business going bankrupt
 
Ipv6Ready said:
Is that a bail in?... that is just a business going bankrupt
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A licensed Australian business that provided banking services, including taking deposits from the public. It's not much different to what 'big four' banks offer.
 
That $250k guarantee is paid for by the banks in licences fees etc

$250k deposit guarantee isn’t free for banks.

A bail in I would have thought to be AFTER the bankruptcy becuase the CEO of XYZ bank is cousins of Prime Miniter, the Government changes the rules to guarantee savers, bonds and debt
 
willrocks said:
Maybe not the 'big four', but there's the 1990 example of Pyramid Building Society taking 49% of deposits. Depositors received 51 cents per dollar which took 15 years to be returned (final cheques sent in 2005).
Look at how the government guarantee worked in this case.
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Was the guarantee in place back then?
If so did it cover that building society?
The current $250k scheme started in 2012.

Here is a list of current bank covered:
https://www.guaranteescheme.gov.au/rules/pdf/schedule-1.pdf
 
SilverDJ said:
Was the guarantee in place back then?
If so did it cover that building society?
The current $250k scheme started in 2012.

Here is a list of current bank covered:
https://www.guaranteescheme.gov.au/rules/pdf/schedule-1.pdf
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The state government was reportedly telling people that the Pyramid Building Society was "healthy", and not to overreact.


Taxpayers ended up footing the bill.

Wikipedia said:
The cost of the collapse to the Victoria taxpayers was estimated at over $900 million, causing a fuel levy of 3c-per-litre to be introduced by the Victorian Government to finance the government's liability. The levy remained in force for five years.
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https://en.wikipedia.org/wiki/Pyramid_Building_Society
 
Ipv6Ready said:
That $250k guarantee is paid for by the banks in licences fees etc

$250k deposit guarantee isn’t free for banks.
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Do you think the government has the capacity to pay depositors under this scheme? No, they'll raise taxes (or 'levies') if it ever needs to be claimed on. Just like they did with Pyramid Building Society and the 3c per litre fuel levy.
 
Few would know that very quietly on 14 February 2018, with just 7 senators present, the Financial Sector Legislation Amendment (Crisis Resolution Powers And Other Measures) Bill 2017 was passed into law on a voice vote. You likely saw no press on the matter and yet the ramifications for all Australians are potentially huge.

This is a very long and complicated piece of legislation but at its very core it brings Australia into line with the ‘Bail In’ agenda of the Bank of International Settlements (BIS) as agreed at the G20 here in Brisbane in 2014. ‘Bail In’ is about government not bailing out distressed institutions as we saw in the GFC using tax payer’s money, rather using the creditors of the bank to bail itself out.

The legislation allows our banking regulator APRA ‘crisis powers’ to secretly step in and run distressed banks. It allows APRA to then confiscate and write off certain types of bonds and hybrid securities and allows them to confiscate cash savings of SMSF’s. Whereas elsewhere around the world, including our neighbours New Zealand, they specifically include the confiscation of depositors’ funds (savings), the Aussie version just cleverly doesn’t specifically exclude that…
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More: https://www.ainsliebullion.com.au/g...s-your-cash-now-/tabid/88/a/1722/default.aspx
 
willrocks said:
Do you think the government has the capacity to pay depositors under this scheme? No, they'll raise taxes (or 'levies') if it ever needs to be claimed on. Just like they did with Pyramid Building Society and the 3c per litre fuel levy.
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That’s the point though... the 250k gauantee is paid for by the banks. The fact the government decides to waste it by giving it to greedy farmers and idiots who build homes in flood zone without insurance etc, it’s not banks fault.
 
SilverDJ said:
Apartment glut in Liverpool (start at 7:00)
19 apartments for sale in the building, no one even inspecting after price drops, 200+ days on the market:
https://www.domain.com.au/sale/?excludeunderoffer=1&ssubs=1&street=420+macquarie+st+liverpool

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Only a disaster if one needs to sell urgently now or in the next three years. If that property was reduced to $470k (now) and the strata search didn’t come up with any major repair issues, I’d buy it, looking forward ten years.

In fact if the price was about 500k in three years time I’d consider buying it as investment with the second airport in the future.
 
willrocks said:
Assuming the downturn only lasts three years. That's a big assumption.
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Very true, it could get worse.

But I’m pretty moderate in my outlook and trying to factor in only the known wave that is coming, higher interest and tightening of lending criteria, hence only about 4% percent decline per year over three years, that is without any big unknown crisis unfolding.

My views on royal commission is that it will be a “over all” drag on property prices but not a real chance of creating crash just because of it.

Still plenty of eager buyers willing to share losses with sellers at the moment. When I see 50 percent clearance over the weekend, I see lucky sellers not smart bargain hunters lol.

My view until there is a recession that increases unemployment to 10% we won’t see a property crash.
 
Ipv6Ready said:
My view until there is a recession that increases unemployment to 10% we won’t see a property crash.
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It's an interesting view and I'm curious what it's based on?

America's and Ireland's real estate crashes both preceded a labour market crisis. That is, the real estate crash happened before a recession. High unemployment was only recorded afterward. I think there are other examples too but can't be bothered searching.
 
willrocks said:
It's an interesting view and I'm curious what it's based on?

America's and Ireland's real estate crashes both preceded a labour market crisis. That is, the real estate crash happened before a recession. High unemployment was only recorded afterward. I think there are other examples too but can't be bothered searching.
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What were their investment percentages compared to oz?
If your only mortage is your home and you still have your job, you are fine regardless of what the market does. House prices could drop by 80% and it won't have any impact on your repayments.
But if you have highly leveraged investment properties on interest only loans, it can be a different ball game.
 
SilverDJ said:
What were their investment percentages compared to oz?
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I'm not sure.

SilverDJ said:
If your only mortage is your home and you still have your job, you are fine regardless of what the market does. House prices could drop by 80% and it won't have any impact on your repayments.
But if you have highly leveraged investment properties on interest only loans, it can be a different ball game.
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Well before a 80% drop, banks would demand more capital or they would call in the loan. As almost every Australian mortgage contract has a clause that allows this. It wouldn't matter whether it's a primary residence, or if it's an investment.
 
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