Covered Bonds issued by ANZ - depositors beware !!!!

[Ronnie 666]

Yippe our very own subprime

Not quite - the difference between covered bonds and mortgage backed securities, is that if a loan in the covered pool defaults or matures, it has to be replaced with another loan, so that the cover pool is maintained

In the continuing absence of moral hazard, the banking sector is more and more showing that they should be tarred and feathered and run out of town.

And where would you like to keep your money/get a home loan/credit card etc? There is a need for banks, and not all bankers are the scum of the earth they are being made out to be right now.. that label should be reserved for a banks with initials G.S.

What happens when a number of loans (a significant number) default and cannot be replaced. For example the property market falls and coupled with unemployment there are multiple defaults on mortgages which make up most of the bank 'assets'. Then this suddenly reduces the asset pool so that the covered bond is no longer 8% but 20%. Then bank deposits fall by 50% and the covered bond is now suddenly 30%. Please explain how the depositor avoids the silver bullet ?? Please don't tell us that will never happen. As we all know it probably will.

 

[hyperinflation]

What happens when a number of loans (a significant number) default and cannot be replaced. For example the property market falls and coupled with unemployment there are multiple defaults on mortgages which make up most of the bank 'assets'. Then this suddenly reduces the asset pool so that the covered bond is no longer 8% but 20%. Then bank deposits fall by 50% and the covered bond is now suddenly 30%. Please explain how the depositor avoids the silver bullet ?? Please don't tell us that will never happen. As we all know it probably will.

If deposits fall by 50% then its a bank run, and then the banks goes bust - not the fault of covered bonds though. The gov guarantee of 250k per account would have to step in to cover depositors.. and if the gov cannot borrow enough money to fund the guarantee, then Australia would already be in a very bad place and the AUD would be worthless.. meaning that the lost savings would be of no use anyway.

 

[Silverthorn]

CBA has issued some.

[h]Covered bond auction a fizzer for CBA [/h]
Australia's attempt to lower bank funding costs with covered bonds is still leaving the nation's biggest financial institution paying investors the highest domestic yield premiums on record.

http://www.smh.com.au/business/markets/covered-bond-auction-a-fizzer-for-cba-20120118-1q59v.html

ends with

"The banks pressured the government to allow covered bonds by saying they would reduce funding costs," said Tyndall's Sorrell. "It doesn't seem to have been very effective."

 

[Nukz]

Sounds more like MBS as the bonds are a pool of residential mortgages. You gotta ask yourself if Australian property was that good a asset for the banks to hold then why are they trying to sell them to the US and Eurozone.

I believe CBA hold 73% of there total assets in residential property mortgages.... much more than any U.S bank ever did. The other's are much the same.

 

[hiho]

its like when the bank promotes fixed mortgage rates, time to go variable

 

[renovator]

Sounds more like MBS as the bonds are a pool of residential mortgages. You gotta ask yourself if Australian property was that good a asset for the banks to hold then why are they trying to sell them to the US and Eurozone.

I believe CBA hold 73% of there total assets in residential property mortgages.... much more than any U.S bank ever did. The other's are much the same.

To raise more capital to lend more so they can make more money. Geez im clever ....just ask me .The day one of the big 4 banks in australia goes bust I'l run down george street in sydney naked . I just cant see it happening in the near future.In ten years time maybe .

Lets face it most people will run to the big 4 if things get tough & that will keep them afloat for a few more years. It will be the smaller credit unions & community banks that go belly up first then you will have plenty of time to get your cash out . IMO

We all have our theories & thats mine im not worried at all about aus banks have you seen the profits they generate for the share holders? any entity thats generating those profits is reasonably safe .

 

[errol43]

If any of the 4 major banks go bust, Who get first option on any assets, the shareholders or the depositors???.

Regards Errol43

 

[hiho]

If any of the 4 major banks go bust, Who get first option on any assets, the shareholders or the depositors???.

Regards Errol43

actually its the preferrred shareholders who win

 

[fishball]

If any of the 4 major banks go bust, Who get first option on any assets, the shareholders or the depositors???.

Regards Errol43

Shareholders get last dibs.

I don't know if depositors are first though, the government might be first. Maybe, not sure.

 

[Ouch]

If any of the 4 major banks go bust, Who get first option on any assets, the shareholders or the depositors???.

Regards Errol43

Shareholders get last dibs.

I don't know if depositors are first though, the government might be first. Maybe, not sure.

Possibly in this order (from first to last): creditors/depositors, bondholders, preferred shareholders, shareholders.