I'm sorry but system shutdowns at etrade and Commsec mean very little. I have some small amount of knowledge about this topic and in my experience it's far more plausible to attribute these kinds of incidents to errors, mistakes, bugs and programming problems than to any plan to restrict cash-flow etc.
What about people not being able to get to their money in some of the major Australian banks relatively recently? I have never seen that in recent memory, but then again I wasn't too up-to-date with the news for years, so perhaps that has happened before.
I got friends who work in IT at Big 4 banks... the stories they tell me it's a surprise the banks have such decent uptime already! It's anecdote evidence only of course "Do not attribute to malice what can be explained with incompetence" comes to mind.
Hmm, strikes me as very odd regardless. More than one bank hitting headlines for going down like that - and all relatively recently. This, combined with my penchant for listening to financial gurus and the lies upon lies people still believe about banking and money and politics, makes me think things aren't as stable as they seem.
WOW what a thread. Some of the comments in here have me speechless. It is hard to believe that a few stackers have the presence of mind to know the intrinsic store of wealth that PM's are and still haven't educated themselves enough about our banking system. Please don't take that the wrong way but it is just scary. Lets put a few truths out there: * The roughly 5 Billion taken by out "Highly Regulated and Safe" banks from the US Fed came from a fund supposed to be reserved for EMERGENCY LOANS! APRA FAILED to even inform the public that they took the(if they even knew). The banks also failed to alert the ASX that they had taken emergency loans from another foreign central bank = No Speeding ticket issued by the ASX. (Thanks goes to Kris Sayce of Money Morning for uncovering this bombshell and Ron Paul for making the US Fed release that info). * The Australian housing market is pretty much completely owned by the big 4 and their subsidiaries worth over 1 trillion dollars. Of which around 30% is funded from offshore lending (the big 4 can only afford to fund 70% of mortgages). * Up to 60% (CommBank) of the big four's assets are in Residential Mortgages. * When the GFC hit the UK and US banks only had 12 and 14% of their assets in Residential Mortgages, Sub Prime was a tiny tiny percentage of that and when it went bust it took the lot down with them. What does a drop in your 60% of assets do to your balance sheet and your ability to fund your 30% of borrowing I wonder? * The great John Howard and Costello allowed the biggest expansion of credit in Australia's history. First home owner/buyer grants handed out to thousands of people that would never have afforded a house (that money was allowed to be used as deposits) where previously only savings accrued from earnings over long periods could satisfy a housing loan, kicked off IMHO the largest bubble in an asset class in Australia's history. 90-95 and 100% lends FROM THE BIG FOUR were common (still get a 95% lend now). Low Doc, NO Doc Loans were available FROM THE BIG FOUR. Don't think these dodgy lending practices were just from dodgy brokers companies, you could get the same service walking into one of the big four. Now we have these twits from the ALP keeping the bubble going with FHOG's and the rest of the stimulus BS they handed out along with state governments dropping stamp duties etc and the bubble is still alive. Not only is it still alive but now we have thousands more FHO's in hock to their eyeballs, spending historically the largest amounts of disposable income on their mortgages. * Australian banks may or may not have Greek or other dodgy country's sovereign dodgy debt on their balance sheets but you can bet your bottom dollar that the banks that make up that 30% of Foreign lending of the big four do. That 30% is mostly rolled over in 3 years or less much of it 1 year terms but is lent out at 25 year terms (to Australian home owners). So taking in consideration the above, with reported house prices across the country dropping. Creditor banks to Australian banks having toxic Greek/PIIGS debt on their books, still no doubt copping hiding losses from sub prime still unfolding and the horrible state of the US and other housing markets............. How much do you think the roll over costs of that 30% is going to rise to in coming months?
O/C Fractional reserve banking is what banking is all about...When you learn about fractional reserve banking is, you know that all banks are fragile in bad economic times...I do agree with you in the fact that if I were to invest fiat with a bank, I would rather have in one of Australia's big 4 bank than a USA one. One only has to look at the FDIC in the USA to see how many USA banks have been forced to close up shop and become amalgamated with other banks..Last time I saw the number, it was well over 200.. Australian MSM doesnt report on matters such as these as they don't want to alarm the people. Regards Errol43
Continue that down the path........ The banks as we have already seen aren't going to cop that increase. Bank CEO's are only in the job for a few years and are only accountable to shareholders and want their big fat bonus cheques. They will hand those increases on to mortgage holders irrespective of the RBA's rates. Making the RBA essentially a useless organisation. Those further increases put further pressure on already over extended home owners..... Defaults start rising faster........Bank asset values start dropping further........The merry go round starts gaining momentum............ Who is the only party that could possibly step in? The tax payer! With that much debt relative to GDP and that much institutional money punting on Australia as a proxy to punt on China... 2Billion on insurance against an Australian default is probably equivalent to one of us putting 5% of out portfolio in PM's. Edit: I am probably in the C category. Holding as much cash as I can to jump on up coming asset price drops.
yea good info, where did you source the 12/14% of US and UK banks have lended for residential mortgages from? If thats true then we are in alot more trouble then i thought in Aus Whats your point of view with mortgage lenders insurance if there is a housing crash? Will the insurers just go broke first or will they offer some level of "protection" ? And i guess the biggest difference to the US is that the individuals get stuck with the toxic debt and not the banks but if people declare bankruptcy and spend less money then it will bring our whole ponzi economy down i guess?
Wout I can't remember where I read that figure. It was back in 2008 I think when the GFC was kicking off. Possibly the Economist... A quick google couldn't find the source. All I know is that 60% in one asset class when leverage is involved is just asking for a meltdown of biblical proportions. Individuals get stuck with toxic debt yes and it is a really really socially frowned upon thing to go into bankruptcy, but think about this. If you were hocked to the eyeballs with debt on a house that just copped a large loss and you are low on cash because it is going all to the paying off a loan and you did the figures and your house after 7 years would still be worth less than what you owe on it..... Wouldn't you go into bankruptcy also and move into renting in order to save enough money over those 7 years to buy a house again once credit was available? I know I would!
Found this on a blog like thingy http://macrobusiness.com.au/2011/03/cba’s-capital-redux/ 53% apparently.
The Big Four banks (plus their subsidiary banks) are all upgrading their IT systems, which in some cases are nearly 40 years old. There are decades worth of incremental upgrades and patches that have been hacked together to make, for example, the APCS/CS1 system talk properly to the CECS/CS3 system so that you your bank will let you use your EFTPOS card because they know a cheque has cleared into your account and you have funds available. Of course the system that Basically, they're gutting out their systems and rebuilding them. Doing that means things sometimes break.
That's brilliant. My IT dayjob occasionally takes me inside financial institutions and insurance companies - this phrase speaks volumes.
How can we expect to go back to the poll for a change in a government went we cant go back to the poll in a thread?
In my experience, the more people you have on a project, the worse quality that project is likely to have. And there are a LOT of people on these projects!
Great post. Add to this: * ~70% of bank funding comes from offshore. What happens when credit markets implode/freeze up, LIBOR rate explodes again, etc.? * Banks are waaay more leveraged than they were in 1889-1890. IIRC today it is around 30-1, back then closer to the standard 10-1 (when Australian Pound was introduced it was 25% backed by gold)... banking system effectively collapsed and there was a week long BANK HOLIDAY in the first week of May 1893 in Victoria. * Lending markets are fueled by pyramid-style government purchases of securitised RMBSs. This can't keep going on forever, though Wayne Swan kept trying... he said "go buy another $4B worth" when they still hadn't filled the previous "order". * Go to a bank and deposit two cents, or add two cents to your cash deposit. In all circumstances I have experienced the bank adds the two cents without asking anything from you. What does that say about the value of $$$? And just to make you feel warm and fuzzy, the Commonwealth has been running a budget deficit of $1B/week (spending ~117% of revenue), Queensland is beyond fkucked and the other States are not much better off. Oh, and the property market is clearly falling... nothing to see here, move along... Oh - and one more final note, you'll find find that many international banks like JP Morgan, HSBC, etc. are major shareholders in the big four... what happens if the major shareholders of the big four get into trouble? Hahaha... FUBAR TIME! So to answer the question I am mostly C with a little bit of B. I think D is still a few years away yet.
Why are these upgrades being performed at roughly similar times though? Do they need their systems to work well with other banks and some sort of inter-bank synchronisation is necessary?
