More info here http://www.bordermail.com.au/story/422319/rural-savings-threatened-after-collapse/?cs=12
"Given Banksia does not hold a banking license, the funds in the debentures are not backed by a deposit guarantee." I wonder how many were actually aware of this and assumed that it's a bank given their misleading name with the word in it. Do they they inform the customer at the beginning or let them figure it out themselves?
:lol: Can picture it at court - "We named ourselves after a popular native flower the "bank" connotation was completely incidental you honour."
Big Banksia building here in Ballarat. There will be many affected locals. Lots of retirees chasing higher returns than the Big 4 will have their well laid plans in tatters. Their ads have always had the disclaimer that you could lose some or all of your investment so at least they were being upfront about it.
so what did banksia do? were they a fund which invested/traded people's money or did they just lend out money with interest or both?
Flow on effects will hurt several country communities. All branches are locked and Im sure there will be many business people and their employees with suddenly unknown futures. Lots of self-funded retirees have become instant centrelink recipients just in case anybody thinks this doesnt have flow on effects for the rest of us.
It will be very interesting to find out. On the face of it I find the "negative equity" comment rather than insolvent strange and indicates something dodgy. Anyone who finds updates should post please.
No-one knows the extent of losses yet - there could be $500m left to distribute etc (just a random number plucked from the air). News tonight is saying 8 weeks and debenture holders will start getting some returns, but there will be some capital losses. I think the bigger unspoken story here is the fate of all of the mortgage holders who bought residential, rural or commercial property with loans from this entity - I suspect there are going to be a lot of debts called in and that's probably going to hurt more than the debenture holders who lose some of their investments. "Hey, you gave us $100k, here's $50k back." "Hey we loaned you $100k, pay NOW. You can't? Thanks for the house."
Some of these people though, with "life savings" invested in companies like this. It's an INVESTMENT, there's RISK.
I've just been talking about the same thing with someone. If mortgage holders cant get refinanced their home gets firesaled and they are left with any leftovers. Not sure how much of this is related to mortgages though. Most of the PPOR buyers have loans with the Big4. Bad debts and loans may be more likely to be related to investment properties and commercial developments IMO. Even if they get $500 mill back after legal fees, sundries, royal commissions and charges that will be reduced to next to bugger all. Pyramid took over 10 years to resolve and people ended up getting bugger all.
They had really nice prospectuses and good returns for more than 40 years. Many people would have done ok investing with them over the years. Many would be the same ones losing now. Long termers who thought they were all good getting higher returns than others. Lack of diversification sticks out as a major lesson, but I reckon as people age they tend to concentrate rather than spread their investments which is why large slabs of peoples portfolios will be lost. Lots of these people will own their PPOR but will be suddenly asset rich and cashflow poor.
Some more details... http://www.weeklytimesnow.com.au/article/2012/10/26/546817_latest-news.html Quotes from article: ASICs role as a regulater has also been questioned by some.
