On May 20, 8:48 pm, Lionel van den Berg <lione...@[EMAIL PROTECTED]
> wrote:
> Recently the government raised the idea of protecting the first 20K of
> savings deposits in the case that a bank goes under. Not sure if they
are
> still following this up.
It's still just a proposal.
This article is from March this year.
business.theage.com.au/is-your-bank-deposit-safe-no--but-it-could-
be-20080329-22d1.html
-- Phil
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Is your bank deposit safe? No - but it could be
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* James Kirby
* March 30, 2008
* Page 1 of 2
YOU just know when you see politicians berating a public servant for
doing his job it's worth a second look.
Reserve Bank governor Glenn Stevens got a taste of what's known in
footy circles as "tunnelling" (ask St Kilda's Nick Riewoldt) when he
found himself blasted by Opposition Leader Brendan Nelson in recent
days. Stevens had the temerity to suggest our banks operate in a free
market.
Asked to comment on rising interest rates, Stevens suggested higher
rates - even rates that were higher than RBA guidance - were
"realistic". And before Treasurer Wayne Swan, who's been haranguing
the big bad banks for weeks could say a word, Nelson said Stevens was
"bordering on insensitive" making comments that were "not what
Australians need to hear".
Well, what do Australians need to hear? There's no credit crisis.
Would that suit? How about the banking sector is a rose garden where
the sun always ****nes. Cut it out chaps. Banks and their customers
deserve better. I don't remember any politician complaining when banks
were cutting rates beyond the RBA guidance only a few years ago.
While both parties paint the banks as salivating wolves, the truth is
that more people than ever trust Australian banks as the best place to
put their money.
Yet for all the point-scoring in Canberra nobody seems to be paying
attention to an RBA-backed proposal to protect bank customers.
The Council of Financial Regulators - an im****tant group chaired by
the RBA - has recently dusted off its proposal that the Government
should consider explicitly protecting bank customers. In brief, the
proposal suggests that the first $20,000 in any bank account would be
directly guaranteed by the Federal Government. This idea might come as
a surprise to many people who think bank savings are guaranteed
already. Well, folks, they are not. There is no guarantee for bank
funds. There is admittedly an implicit guarantee in the ac***ulated
habits of the past century where no government has allowed a bank to
fail. But is that good enough?
We're back in an era of bank collapses. In Britain the collapse of
Northern Rock was the first bank failure in a century. Likewise in the
US, the collapse and government-enabled rescue of investment bank Bear
Stearns by JPMorgan is the biggest banking crisis in more than a
decade.
Now it's worth noting that while banks are getting into trouble all
around the world, Australians are ru****ng back into the banks with
their money.
The RBA last week released its Financial Stability Review. Buried in
the back pages of that re****t was news that household deposits - that
is, bank deposits from me and you - are rising at their fastest rate
for several years.
In the six months to January household bank deposits grew by an
annualised rate of 20%. Now, remember that the six months to January
were not that bad. It's in the three months since January that the
climate of global markets has rapidly deteriorated. Our own
stockmarket is down almost 20% since the start of the year. As banks
regain their place at the heart of the financial system there is
emerging evidence that non-bank rivals will find it very hard going in
the near future. The share of the lending market held by non-banks,
such as RAMS, in the past six months fell by a stunning 50% from 12%
to 6%.
What's more, the RBA confirms that the rush back to the bank savings
accounts will accelerate in the months ahead. As successive waves of
financial crisis wash across the market - Allco, Centro, MFS are now
set to be joined by the broking house Opes Prime which could be facing
losses of up to $1 billion - there is still no guarantee bank accounts
are safe. But they could be. If everyone could know that at least the
first $20,000 they had in the bank was secure I think that might be
something Australians would need to hear.
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