Bail-in legislation coming to Australia?

[rbaggio]

Digging through the Financial Stability Board April 15 publication Implementing the FSB Key Attributes of Effective Resolution Regimes how far have we come?, there is this little nugget on p.5:

In many jurisdictions, resolution authorities still lack the powers
set out in the Key Attributes to achieve rapid transfer of assets and liabilities and to
write down debt of a failing institution or convert it into equity ("bail-in"), although
legislation is in train in some jurisdictions (including Australia, Brazil, the EU, France,
Germany, Indonesia, Singapore and South Africa) to align national regimes fully with
the Key Attributes.

src: http://www.financialstabilityboard.org/publications/r_130419b.pdf

So what are these Key Attributes, I hear you groan? Well, we need to turn to the Financial Stability Board April 11 publication Thematic Review on Resolution Regimes. The Key Attributes (KA) are spelled out on p18-33. KA 3 is the one of interest:

KA 3 sets out the range of resolution powers that should be available in resolution regimes.
These include powers to transfer assets, rights and liabilities of, or shares in, failing
institutions to a purchaser, bridge institution or asset management company (AMC); to write
down and convert debt of the firm in resolution (bail-in); to appoint an administrator; and to
operate the firm in resolution and take actions necessary to restructure or wind down its
operations.

And who exactly is the FSB?

The FSB has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. It brings together national authorities responsible for financial stability in significant international financial centres, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

 

[boston]

My understanding was, and I stand to be corrected, that 'Bail-In' provisions were initiated in Australia in 2009. I wonder who was in government then?

 

[PMS]

So will the Governments bank deposit insurance scheme that covers deposits up to a maximum of $250,000 be honoured in the event of a major bank failure?

The reality is such a scheme is designed to give depositors the impression their money is safe in the event of a possible future bank failure thereby ensuring 'con'fidence in the banking system and lessening the likelihood of bank runs.

Of course if the whole shebang really goes south then such government guarantees are worth diddly squat as the losses would likely exceed anything the government (taxpayers) could cover.

In that situation insured deposits may end up being 'bailed in' anyway.

However I'm sure the government could always borrow a few $Trillion from our friends over at 'The Fed' to ensure the banksters get their bonuses and stick the bill to the next few generations of tax serfs!

 

[Tacrezod]

For years on SS, one of the major (AusPM) gripes was "privatise the profits, socialise the losses".

Is this not now the manifestation of the tides being turned and the losses being privatised and hence a good thing?

 

[boston]

So will the Governments bank deposit insurance scheme that covers deposits up to a maximum of $250,000 be honoured in the event of a major bank failure?

Probably yes, just like the depositors of Victoria's Pyramid Building Society.

They got all their money back. Unfortunately it took some of them over 20 years to get it - but they got it!

 

[trew]

For years on SS, one of the major (AusPM) gripes was "privatise the profits, socialise the losses".

Is this not now the manifestation of the tides being turned and the losses being privatised and hence a good thing?

Provided that before individuals or companies were asked to take any haircuts on their deposits,
- all existing bank shareholders got completely wiped out
- all commercial bondholders got wiped out (including all the billions borrowed from overseas by Aus banks)
- all the top bankers got sacked and had to repay their bonuses

A business with a trading account in a bank does not share in the bank's profits - why should they be expected to share in it's losses ?????


And if the govt needs to front up money to bail out a bank then that bank should immediately be nationalised with all shareholders getting sweet FA.

 

[markcoinoz]

So will the Governments bank deposit insurance scheme that covers deposits up to a maximum of $250,000 be honoured in the event of a major bank failure?

Probably yes, just like the depositors of Victoria's Pyramid Building Society.

They got all their money back. Unfortunately it took some of them over 20 years to get it - but they got it!

Boston, I think you are wrong on that.
We got a cheque every year for I don't know how long.
However, for memory it was not the full amount.

The only reason we got the amount we did get back was because Jolly the Treasurer (think that was his name) said that our money was protected under legislation when in fact it wasn't. We were very lucky to get any of it back. It was that Jolly made a monumental blunder saying it was protected. Building Societys and Credit Unions had no such protection. We came under a completely different clearing house system run by Cuscal and legislation. I think he resigned not long after that.

AH! Those were the days and it looks like returning with much wider ramifications.
Just different players this time around.

 

[PMS]

If the entire banking system collapses versus a bank (or two) then deposit insurance is probably a moot point. AIG wrote so many credit default swaps that when the 2008 GFC hit they couldn't cover them all and AIG needed bailing out. And don't forget that Goldman Sachs got a deal that saw them get 100 cents in the dollar to cover their gambling debts... Lucky for some!

Most governments are now so indebted that another taxpayer funded banking system bailout is beyond them, hence now we are seeing the 'bail in'.

While high return investments obviously come with risk ordinary people's savings accounts shouldn't be part of the deal.

It all comes back to the banksters being allowed to go to the 'casino' and gamble to infinity. Reinstating Glass Steagall would at least protect the ordinary depositor.

Put your money in the bank and get it 'bailed in', put it in the stockmarket and get gamed by the big boys, put it under the bed and watch it get inflated away, buy gold and silver and watch the prices get slammed and remain sideways until you get so desperate for money after your job is 'off shored' you end up selling at a loss.

Is there some kind of conspiracy going on to bankrupt the middle class or am I just imagining it?

 

[boston]

So will the Governments bank deposit insurance scheme that covers deposits up to a maximum of $250,000 be honoured in the event of a major bank failure?

Probably yes, just like the depositors of Victoria's Pyramid Building Society.

They got all their money back. Unfortunately it took some of them over 20 years to get it - but they got it!

Boston, I think you are wrong on that.
We got a cheque every year for I don't know how long.
However, for memory it was not the full amount.

The only reason we got the amount we did get back was because Jolly the Treasurer (think that was his name) said that our money was protected under legislation when in fact it wasn't. We were very lucky to get any of it back. It was that Jolly made a monumental blunder saying it was protected. Building Societys and Credit Unions had no such protection. We came under a completely different clearing house system run by Cuscal and legislation. I think he resigned not long after that.

AH! Those were the days and it looks like returning with much wider ramifications.
Just different players this time around.

Sorry. You are correct regarding the differences between bank accounts and credit unions/building society accounts.

The point I was trying to make, unsuccessfully, was that some got there money back after inflation had eroded it's purchasing power substantially.

 

[markcoinoz]

Boston,

You make a very valid point.

One of the reasons why we put money into "Pyramid Building Society" was because of the high rate of interest.
18.5% !!! Can you believe that? :lol:


Just imagine you had a bail-in situation here in Australia where your money could be locked up for a very long time not forgetting at least partial confiscation. Given that a lot of Stackers believe at some future point in time the proverbial SHTF situation, after the deflationary period could very well become the inflationary period. That is a scary scenario, one that would wipe out a lot of people. I do think the area that is most likely at risk and be targeted will be Superannuation. That's why I opted out of Gov't type Super and started a SMSF about 5 years ago.
Still not perfect.

 

[PMS]

A mate of mine has a friend who pulled money out of their SMSF to buy gold and is now involved in a legal fight with the ATO.
Don't know any more details but I'll ask.

Boston,

You make a very valid point.

One of the reasons why we put money into "Pyramid Building Society" was because of the high rate of interest.
18.5% !!! Can you believe that? :lol:


Just imagine you had a bail-in situation here in Australia where your money could be locked up for a very long time not forgetting at least partial confiscation. Given that a lot of Stackers believe at some future point in time the proverbial SHTF situation, after the deflationary period could very well become the inflationary period. That is a scary scenario, one that would wipe out a lot of people. I do think the area that is most likely at risk and be targeted will be Superannuation. That's why I opted out of Gov't type Super and started a SMSF about 5 years ago.
Still not perfect.

 

[boston]

A mate of mine has a friend who pulled money out of their SMSF to buy gold and is now involved in a legal fight with the ATO.
Don't know any more details but I'll ask.

That is surprising, considering that quite a few stackers have physical AG/AU in their SMSF.

 

[PMS]

I think their gold is effectively now outside their SMSF as in they're not saying how much they have or where it is stored.

They are expecting the entire financial system to go belly up and are convinced whatever you don't physically hold you will lose.

Can't say I blame them but the ATO is not happy they've pulled funds out of their super and is insisting they reinstate it. They are basically trying to pull everything they own out of the system before it disappears down some black hole and into the pockets of the criminal financial mafia.

[deleted a paragraph]

A mate of mine has a friend who pulled money out of their SMSF to buy gold and is now involved in a legal fight with the ATO.
Don't know any more details but I'll ask.

That is surprising, considering that quite a few stackers have physical AG/AU in their SMSF.

 

[markcoinoz]

There was discussion about this same issue about 12mths ago.

It comes down to how you store it.
Legally, you can store it at a vault or even store it yourself somewhere.
Maybe he didn't satisfy them with how it was going to be stored and whether
he filled out the paperwork properly.

 

[Old Codger]

Back in 1955, when I first joined the bank, my branch manager said to me when talking of investments etc,

"young codger, ALWAYS remember, THE HIGHER THE GAIN, THE GREATER THE RISK".

(remenber 'Estate Mortgage'? my sister in law lost her retirement cheque in that)


OC

 

[boston]

There was discussion about this same issue about 12mths ago.

It comes down to how you store it.
Legally, you can store it at a vault or even store it yourself somewhere.
Maybe he didn't satisfy them with how it was going to be stored and whether
he filled out the paperwork properly.

Or maybe he told them to go away, and they took umbrance at that!

Not the first time that the ATO/police/government/councils etc push a point for their own self satisfaction.

 

[ilikecoins]

http://barnabyisright.com/2013/07/1...rus-style-bail-in-of-banks-in-2013-14-budget/

 

[Byron]

Boston,

You make a very valid point.

One of the reasons why we put money into "Pyramid Building Society" was because of the high rate of interest.
18.5% !!! Can you believe that? :lol:


Just imagine you had a bail-in situation here in Australia where your money could be locked up for a very long time not forgetting at least partial confiscation. Given that a lot of Stackers believe at some future point in time the proverbial SHTF situation, after the deflationary period could very well become the inflationary period. That is a scary scenario, one that would wipe out a lot of people. I do think the area that is most likely at risk and be targeted will be Superannuation. That's why I opted out of Gov't type Super and started a SMSF about 5 years ago.
Still not perfect.

Hi Mark,

Would you mind sharing a bit more info about what it was like in those early 90s recession days when Pyramid collapsed? Was it similar to now?

Also even with an SMSF outside of physical PMs or direct property, funds are still with banks or in the sharemarket. So loss of those funds is still possible.

 

[rbaggio]

WELL THIS JUST GETS BETTER AND BETTER .....

Tying in with my original post, there is this from the Australian yesterday:

It was originally tipped that former senior Department of Foreign Affairs and Trade official and diplomat Philip Green, Rudd's chief of staff from his days as minister for foreign affairs, would take the top job in the Prime Minister's office. Instead, the position went to Jim Murphy, a senior Treasury official and director of the markets division, which oversees capital markets, corporations, foreign investment and financial systems.

Although it may pain the Prime Minister's old colleagues at DFAT (and cause some chagrin in the corridors of the Department of Prime Minister and Cabinet), Treasury officers are generally regarded as the creme de la creme of the bureaucracy.

Murphy's appointment has three purposes. He is there to reassure the public service it will not be subjected again to the mistreatment it suffered during Rudd's first time in the job. He is there also to reassure business and rebuild relations with the top end of town, which had all but collapsed by the end of Gillard's prime ministership. But the third consideration behind Murphy's appointment may be the most significant.

[Murphy stood by Rudd's side as the storm of the global financial crisis raged. With the waters still choppy in its wake -- and signs that Australia's days of smooth sailing could be numbered -- he will be vital in navigating the way forward.

And who is this Jim Murphy, exactly?

Well well well ....

He's on the Financial Stability Board. http://www.financialstabilityboard.org/about/scsrc.pdf

Consider yourself warned.

src: http://www.theaustralian.com.au/news/features/kevin-rudds-inner-sanctum/story-e6frg6z6-1226676712532

 

[markcoinoz]

Boston,

You make a very valid point.

One of the reasons why we put money into "Pyramid Building Society" was because of the high rate of interest.
18.5% !!! Can you believe that? :lol:


Just imagine you had a bail-in situation here in Australia where your money could be locked up for a very long time not forgetting at least partial confiscation. Given that a lot of Stackers believe at some future point in time the proverbial SHTF situation, after the deflationary period could very well become the inflationary period. That is a scary scenario, one that would wipe out a lot of people. I do think the area that is most likely at risk and be targeted will be Superannuation. That's why I opted out of Gov't type Super and started a SMSF about 5 years ago.
Still not perfect.

Hi Mark,

Would you mind sharing a bit more info about what it was like in those early 90s recession days when Pyramid collapsed? Was it similar to now?

Also even with an SMSF outside of physical PMs or direct property, funds are still with banks or in the sharemarket. So loss of those funds is still possible.

Hi Byron,

Apology for a late reply.

I see both similarities and certain areas that are completely the opposite leading up to the "87" crash and into the early 90's.
Just before the 87 crash, I had a business and money was flowing. My business partner and I had invested in industrials as well as physical gold and a couple of gold stocks. Sons of Gwalia was one of my favourites along with Brambles, Bell Resources, Bond Corp, etc... What stood out for me at the time was the amount of Mergers & Acquisitions taking place. The stockbroker mentality at the time was "You couldn't lose with the way the market was heading". Bond Corp was a prime example of pie in the sky ferry stuff. Ex: You have an asset and decide you want to T/O a larger company even though your income was not that good and the asset was already highly leveraged to the amount of debt. Mr Bank obliges to the tune of 100% and you now have increased your asset base whilst using the acquired assets income to appease your appetite for greater luxuries and not worrying about the debt. Sooner or later the music has got to stop and it did in Oct87. For us, it wasn't really felt further down the road until 1990. The only company we made any money was Sons of Gwalia being a gold stock.

With deregulation of the banking system, and O/S merchant banks given the green light to enter our market, commercial property had become over heated and it was actually difficult early 90's to get a loan without a good deposit and secure income in the retail market. Even during that time late 80's - early 90's one of my greedy in-laws had been trying to sell their house for nearly 2 years without any success even though it was in the heart of Richmond. They refused to recognise that house prices had dropped substantially and it took that long for the penny to finally drop. The greatest difference between then and now is without doubt the internet. It wasn't until the late 90's that we could trade online and not have to engage with a broker. As the internet has matured so too has the many varied financial instruments to suck in the unsuspecting investor/trader. We now have far more access to information on the global scale. As well, things that once were considered safe are now very much questionable. Term Deposits - Treasury Notes - Bank Bills, even our Superannuation is at risk. We are no longer able to trust government bodies and institutions to do the right thing by citizens. With years of seeing our liberties being eaten away especially more recently, I do not place my trust in Governments, NGO's or Corporations. That includes small companies. If you don't hold it, you don't own it. This link is to add further to the argument that Australian Government at some stage will be knocking on the door for "Bail Ins".

http://www.silverbearcafe.com/private/07.13/brick.html