Bank deposit guarantee

finicky

finicky

Well-Known Member
Silver Stacker
Just had an exchange across the counter with a seemingly informed bank officer.

1/ current government deposit guarantee she said is $150k

2/ it only applies to term deposits
If you have a savings account, or cash management account like online saver, forget it.

3/ She was unblinking and didnt rush to reassure me when i mentioned the possibilty of bail-ins like Cyprus, and that bank depositors here might be regarded as unsecured creditors. I felt that she was agreeing that this is the case.

Ok, so just one experienced and unhesitating bank officer in a country town CBA branch.
 
Might want to check that info as when I was speaking to ASIC a few months ago it was $250k for pretty much every kind of account. I asked about general everyday savings, cheque and our joint, all covered.
 
Ok house, will do. I have a share of a home sale sitting in an online saver account.
 
ASIC/Moneysmart

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Only provision I can see relating to only term deposits is the grandfathering period when the guarantee was dropped from $1m to $250k.
 
Bloody hell, I'm going to take this in and taunt her.
She seemed so confident. Then again she was the one trying to knock me back earlier on a better interest rate for my online saver. Got it straight away by phone calling CBA central.
 
Have you checked uBank? Always been the best rate any time I've looked. Although don't know if they'd qualify for the DG seeing as they're an online only setup (backed by NAB).
 
They can pretty much do what ever than want during a bail-in, try to get some sort of guarantee from APRA that it can't happen like that and good luck to you.
 
Financial system inquiry (response to the interim report) 26th August 2014
http://www.apra.gov.au/Submissions/Documents/140829-APRA-FSI-Response.pdf

"The design of the appropriate mechanism through which losses are imposed on relevant creditors in resolution is dependent on the form of loss-absorbing capacity held by Australian ADIs. Tier 2 capital instruments are required to have a contractual mechanism for conversion or write-off at the point of non-viability of the institution. On the other hand, other forms of loss-absorbing capacity may require the use of a statutory power by the resolution authority in order to be genuinely loss-absorbing in resolution. To this end, some jurisdictions have introduced a statutory 'bail-in' power, which gives resolution authorities the power to write down, or convert into equity, unsecured and uninsured creditor claims to the extent necessary to absorb losses. The resulting reduction in liabilities is intended to recapitalise the failed bank in such a way that it can continue to provide critical economic functions. Although this approach is attractive because it provides a means to transfer the risk of a bank failure away from the public sector to the bank's own creditors, it does not come without costs and risks. At a minimum, the holders of debt subject to bail-in may seek additional spreads to cover any perception of increased risk. In a systemic crisis, bail-in of the creditors of one bank may lead to a run on other banks as creditors seek to avoid a similar bail-in.Australia does not have a statutory bail-in power. APRA does have compulsory transfer of business powers, which, in certain circumstances, could be used to achieve a similar economic effect to a bail-in."
 
When someone deposits money into a bank account it then becomes the banks money and all you have is an "I owe you" from the bank.

They can guarantee all they like but that is something I never forget.
 
Information Paper (International capital comparison study) 13th July 2015
http://www.apra.gov.au/adi/Prudenti...onal-capital-comparison-information-paper.pdf

"The Basel QIS capital adequacy ratios are fully phased-in and as such do not includelegacy AT1 and Tier 2 capital instruments that do not meet the new eligibility requirements introduced by Basel III, but continue to be included in the capital base of banks under transitional provisions. A key determinant of the extent of any such legacy instruments is whether a bank operates in a jurisdiction with contractual, rather than statutory, bail-in arrangements. 11 In the former, legacy instruments must be redeemed and replaced over time. In the latter, existing instruments are automatically eligible (provided they meet all other criteria). The exclusion of legacy instruments results in approximately half of these capital instruments issued by the Australian major banks being excluded from their Basel QIS-reported ratios. The legacy instruments of banks in jurisdictions that have made provision for statutory bail-in are included in full. Banks in statutory bail-in jurisdictions will therefore tend to report relatively more AT1 and Tier 2 capital than other jurisdictions such as Australia during the period of transition. 12 Given the names of the individual banks are not disclosed in the Basel QIS, it is not possible to adjust for this transitional legacy capital issue. The effect of this issue will diminish over time as legacy instruments are replaced, but does mean there is less comparability in non-CET1 ratios at the present time."
 
If you think that a $250K government guarantee on your deposit means that they are guaranteeing your $250K of fiat then think again. They are guaranteeing the banks liability of $250K to you, should the bank issue you with say a 10 year bank bond for $250K in lieu of giving you access to the $250K in order to prevent a collapse of the bank then the government sees the bank as honoring that liability and no settlement is required. Then when you go to cash in the bond in 10 years after rampant inflation it will have little to no value and this theft of purchasing power to re-stock the banks balance sheets is all legal and above board now.
 
What if the bank simply closes your account (like the recent HSBC thread)? Is there any guarantee in that case?
 
SilverPete said:
What if the bank simply closes your account (like the recent HSBC thread)? Is there any guarantee in that case?
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No, only if the bank fails in some major way.
If the bank closes your account, that's a private matter between you and the banking ombudsman and/or your lawyer.
 
SilverDJ said:
House said:
Have you checked uBank? Always been the best rate any time I've looked. Although don't know if they'd qualify for the DG seeing as they're an online only setup (backed by NAB).
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ubank is not on the list:
http://www.apra.gov.au/adi/pages/adilist.aspx
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Not directly

UBank is a division of NAB Personal Banking and operates under NAB's banking license (AFSL 230686). UBank deposits sit on NAB's balance sheet hence UBank deposits are covered by the government guarantee.
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As for getting your money out of the banks.......last month I had to tfr 700K for a settlement on a property. I'm with Commbank and apparently transactions over 500k require three security level 60, staff members to facilitate. "Apparently" it was my "lucky day" as the branch I attended actually had a relieving manager there at the time and that was at a level that "could" be upgraded but it took four hours and I monopolised three staff for much of this time for them to work out how this could be done, wait for the security upgrade to effect, and then to insert their cards many times for each step of the process. Just the week prior to, I did two o/s tfrs each for under $250K and had no problem.

Last week some friends were heading overseas and their settlement may be brought forward, so they needed to tfr 1.4 mil for a property settlement prior to leaving. They bank with St George and after a few hours and calls from the branch to head office they were not able to get this done. So their only option and as they had time, was to write a personal cheque.
 
House said:
Not directly

UBank is a division of NAB Personal Banking and operates under NAB's banking license (AFSL 230686). UBank deposits sit on NAB's balance sheet hence UBank deposits are covered by the government guarantee.
Click to expand...
Click to expand...

Thanks House, I was gonna chime in but didn't have hard facts to hand.

I assume Bankwest similarly falls under CBA? Not that I keep much there..

Question, though: am I wrong in thinking that to keep most of my liquid funds in redraw on my mortgage offers a degree of protection in case of bank failure/similar scenarios? It's not a deposit as such..
 
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