Savings Guarantees

Discussion in 'Wealth Creation & Management' started by Lovey80, Jul 27, 2021.

  1. Lovey80

    Lovey80 Well-Known Member

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    Any bankers out there? Some non bankers may have the answer.

    The government savings guarantee that came in post GFC. 200k per person per institution.

    Does that mean that someone with say 800k in savings should split their savings up among 4 different banks so that each of the 200k is guaranteed by the government if SHTF?

    asking for a friend.
     
  2. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    I believe that it is $250K. However Each bank includes its subsidiaries. St George under Westpac etc. Each bank must be autonomous. But again, if a bank goes under, you may only get your guarantee once liquidation has taken place which may take years. As an example you may only get $100K from the bank then you will receive $150K from the government.
     
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  3. 66rounds

    66rounds Well-Known Member Silver Stacker

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    I don't believe it is per bank either. Highly doubt they will guarantee you multiples of 250k across four major banks.
     
  4. PMCollector

    PMCollector Well-Known Member

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  5. Davros10

    Davros10 Well-Known Member Silver Stacker

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    Looks like a good little earner. From 2017;

    'Under the Scheme Rules, fees were payable on the average daily value of guaranteed liabilities over the preceding month. Cumulative fees paid over the life of the Scheme were $4,489.9 million.'

    There is an upper limit to payments covered, but I haven't been able to find it, but I remember thinking how small it was in the grand scheme. When an event hits that is big enough to bring the scheme in to action people who believe they are fully covered will likely find the fund is emptied before it reaches them.
     
  6. Oddjob

    Oddjob Well-Known Member Silver Stacker

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    It's all smoke and mirrors...........Govt says publicly.

    1) AUD250k per account holder per ADI (Authorised Deposit Institution) ie bank, building society & credit union as regulated by APRA.

    2) Yes one would get caught out with the dual branding / same ownership as sammy has noted re WBC & STG. APRA in their listing of ADI's notes Westpac, then it's three other subsidiaries (bullet pointed under it) being STG, Bank of Melb & Bank SA). APRA are pretty clear about that....all accounts (from that bank and it's subs) are bundled into one total amount per account holder up to your AUD250k.

    3) There is a provision for depositor funds claims over AUD250k, per account holder per ADI. Such would then be third ranking creditor behind your initial AUD250k and second ranking creditor being APRA costs for administrating the Financial Claims System (FCS).Note: APRA in effects acts as the depositors proxy in claims recovery under liquidation.


    What they don tell you is:

    One thing not advised on the APRA or Comm Govt web pages is the total extent of the Commonwealth Govt's liability under the legislation. When first bought in in 2008, the Governments liability was "unlimited". The Commonwealth Govt changed this in 2010/11 so to limit their liability to the bank's and you and I as depositors to only AUD20bn per ADI failure...

    So AUD20bn divided by AUD250k max claim = 80,000 claims. Now I suspect any of the major big four Aust banks, they'd have more than 80,000 depositors (more like millions of depositor clients) so when looking at a bank like Commonwealth Bank who as at 30 June 2020 had circa AUD685bn of customer deposits (on demand. term and other), AUD20bn v CommBank's depositor liability don't go far. If CommBank only had 5m depositor clients (which I think is light on and closer to 10-15m clients), if the FCS up to AUD20bn was paid evenly to all 5m depositors (not as a % ratio to bank balance), then you'd get AUD4,000.00 back initially, not whatever you had in the bank up to AUD250k and you'd be waiting a hellva long time as a third ranking creditor to get the balance back as the bank's assets are sold off / debts recovered over time etc.

    Pyramid Building Society collapsed in 1990 and last distribution was 2006.

    HIH Insurance failed in 2001....final distribution to creditors March 2021.

    Don't expect to get all your money back any time soon if this happened to CBA or any large Aust Bank.

    The key thing here for me is not the value of the Govt Guarantee and ability to pay back (some monies) to depositors but which bank , credit union or building society the Commonwealth Govt would let fail. The govt guarantee isn't for the big bank's...it's for the small ones and public perception of "a guarantee".

    If a small regional bank / other FI with only a few branches, low client numbers, small deposit base and no real impact on the wider Australian banking system was about to fail, I suspect the RBA/APRA/Commonwealth Govt would try and find a buyer for that bank first, but if a buyer couldn't be found, then I suspect unless that bank was in a marginal government electorate, they'd let it fail, activate the FCS and pay out a moderate amount of tax payer dollars to depositors then become a creditor in liquidation.

    It'd be a very different matter with one of the Big 4 Australian Banks. As noted above, CommBank has AUD685bn (as at 30 June 2020) of depositor funds on their book. No Commonwealth Govt wants to pick up that liability nor incur the wrath of the those clients and voters who lost most of their savings with that bank. Further and more important is the systemic risk to the Australian banking sector and economy should a major Australian bank fail. They are all interconnected via intraday loans, exchange settlement accounts and counterparty risk for financial markets instruments...If one of them didn't open tomorrow, the other banks would not be able to lend and borrow between each other, transfer monies between each other as trust would disappear in a heart beat with billions locked up in the bank that failed that the other banks need. ATM's and merchant facilities we use for purchases would shut. It's a tad more detailed than that but I'm trying to keep it simple and short.

    Such an impact would have devastating consequences for not only Australia, but NZ where our big 4 bank own NZ's biggest four banks. The Commonwealth Govt, APRA and RBA would hopefully see this coming and would not let one of the major bank's fail. The Commonwealth Govt would drop the "4 Pillars" policy and get the failing bank a dance partner to ensure no banking failure. The US financial system came to a near grinding halt on the Lehman's failure and their economy and financial system dwafts our. A bank like CommBank has an asset base nearly twice the size of Lehman...so image the impact on Australia would be too big to imagine...The Govt of the day could not let it happen. Our Big 4 or too big to fail.

    The Commonwealth Govt guarantee (FCS) was to calm the public in late 2008...the very early ripples of a possible run on the Australian banks was being seen in early Oct 2008. That's a post for another time as this one is long enough.
     
  7. Ag bullet

    Ag bullet Well-Known Member

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    Come on guys, it's a govt guarantee, you know it ain't worth shit.
     
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  8. 66rounds

    66rounds Well-Known Member Silver Stacker

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    That certainly puts things into perspective.

    Definitely keen to hear more
     
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  9. hardyakkagold

    hardyakkagold Well-Known Member Silver Stacker

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    Some on here don't seem to know shit from clay, Ag bullet;)
     
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  10. leo25

    leo25 Well-Known Member Silver Stacker

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    I wouldn't worry about the government deposit guarantee, as the RBA won't let any of our banks fail anyway. You can't run out of digits in a database.
     
  11. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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    It could take years to ever see your money here in the states if ever. By the time you get it back it wont be worth anything anyway.

    Hes got way too much trust if he has that much in a bank but good luck haha.
     
  12. alor

    alor Well-Known Member Silver Stacker

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    they would freeze first, then consolidated the few banks into one, wahlah the remaining banks you have
    they can always choose to convert them into bank shares, that you cannot trade,causing more small business to close
     
  13. mmm....shiney!

    mmm....shiney! Administrator Staff Member Silver Stacker

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    That would require shareholder approval.
     
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  14. alor

    alor Well-Known Member Silver Stacker

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    debt holder approval
     
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  15. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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    The bank in Cyprus that failed split itself into two parts (the profitable and the not profitable) and paid out with shares in the donkey part of the bank.
     
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  16. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    I managed to get all my money out of Cyprus. My siblings and I sold a property before the collapse. From memory we were pulling out €20,000 a month and only left about €5,000 for ongoing expenses. Then TSHTF.
     
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  17. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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    You called it Sammy!
     
  18. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    I was just practicing what I preach - nil money in your bank accounts.
     
  19. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    On the news this morning, Afghans are queuing at the bank hoping to withdraw there savings. How stupid must you be to still have money in a bank that now you desperately need? No wonder that the place has been a cluster fuck for so long!
     
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  20. alor

    alor Well-Known Member Silver Stacker

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    the x President left town, US left town in the middle of the night, Nato left town
    ATMs are empty
    they should confiscate the poppy fields, 200ha, set it a blaze
     

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