In article
<e7fac175-6755-4e56-8c05-6aaff66a2c9e@[EMAIL PROTECTED]
>,
"phil_herring@[EMAIL PROTECTED]
" <phil_herring@[EMAIL PROTECTED]
> wrote:
>On May 20, 10:31 pm, ppnerkDELETET...@[EMAIL PROTECTED]
(Phred) wrote:
>
>> Thanks for your reply Phil. Unfortunately that link seems to have
>> died: "Sorry your page was not found ..." So in the absence of
>> contrary opinion I'll happily accept what you said above. :-)
>
>The link still works for me.
Maybe you have to be a subscriber?
>Well, here's the full text, regardless...
Thanks very much for taking the trouble to post that article Phil.
Pretty interesting! My remaining question is "What constitutes a
savings account?" Maybe all cash deposits with a bank would be
covered (IBTDs, "savings investment accounts", "retirement accounts",
and the rest of them) but maybe only "true" savings accounts -- with
passbook and all. :-)
Incidentally, that "Drury" name of the author of the article below
rings a bell. A local "Drury" (presumably unrelated :) was in the
papers some time ago in relation to some sort of investment scheme:
<http://tinyurl.com/6ava3s>
or in full:
<http://fido.gov.au/fido/fido.
nsf/byheadline/04-090+Liquidator+appointed++to+illegal+investment+sche
me+in+North+Queensland?openDo***ent>
<quoting extract>
04-090 Liquidator appointed to illegal investment scheme in North
Queensland
Tuesday 30 March 2004
The Australian Securities and Investments Commission (ASIC) yesterday
obtained final orders in the Supreme Court of Queensland, in Cairns,
appointing a liquidator to wind up an unregistered managed investment
scheme operated by Drury Management Pty Ltd. [etc., etc., etc.]
</quoting>
>*************************
>Guarantee no savings grace
>By Barbara Drury | October 3, 2007
>
>Last month Australians switched on the evening news to see people
>lining up outside a British bank called Northern Rock to withdraw
>their savings, some swearing they would never trust a bank with their
>money again. Many Australians would have been left wondering what
>guarantee they have that their savings are protected from a bank
>collapse.
>
>In short, there are no iron-clad guarantees that you will receive your
>savings in full in the unlikely event that your bank goes belly-up.
>
>Deposits in Australian institutions such as banks, credit unions and
>permanent building societies are not guaranteed by their regulator,
>the Australian Prudential Regulation Authority, the Government or the
>Reserve Bank.
>
>Unlike the US and Europe, Australia does not have deposit insurance
>whereby banks pay insurance premiums to a designated government-backed
>institution to guarantee all or part of their savings.
>
>In the US, for example, banks pay insurance premiums to the Federal
>Deposit Insurance Cor****ation, a body similar to APRA.
>
>Australian depositors do, however, have first claim over a failed
>bank's assets.
>
>Professor Fariborz Mo****rian, of the University of NSW's Australian
>School of Business, says this acts as an implicit guarantee in the
>Australian banking system but falls short of full protection because
>the amount depositors receive is limited to the assets available to be
>distributed.
>
>No less a body than the International Monetary Fund believes something
>needs to be done about Australia's arrangements for dealing with
>failed banks. The IMF said in a study last year that Australia's
>financial system was sound but recommended some form of depositor
>protection scheme. 1
>
>Banking regulators also acknowledge there's room for improvement.
>However, they believe the main issue is speed. Depositors may need
>cash for day-to-day living but end up waiting months to get their
>money from a bank wind-up, or longer if it ends up in the courts.
>
>The Council of Financial Regulators - representing APRA, the
>Australian Securities and Investments Commission, the Australian
>Treasury and the Reserve Bank - has recommended the Government
>consider a funding scheme to give depositors timely access to their
>money in the event of a bank failure.
>
>Under the proposal, APRA would administer a facility using Government
>funds to make an immediate payment of up to $20,000 to depositors.
>Depositors could claim additional funds once the bank's assets were
>sold. The money would be reimbursed from the proceeds of any asset
>sale.
>
>Because about 50 per cent of Australian bank assets are in the form of
>retail deposits, the failed bank would have to lose more than 50 per
>cent of its assets before depositors suffered a loss and the
>Government was forced to levy the rest of the banking industry to
>cover the shortfall. This is one reason the banks are opposed to any
>form of depositor guarantee or insurance.
>
>Nicholas Hossack, a director of the Australian Bankers' Association,
>believes the present system of depositor priority is adequate and
>argues that the costs of deposit insurance outweigh the benefits.
>
>The banks argue that the cost of deposit insurance would inevitably be
>passed on to bank customers but also point to the "moral hazard"
>argument.
>
>Hossack says deposit insurance has the potential to encourage people
>to bank with less financially sound institutions on the understanding
>that they will get their money back if the institution goes under,
>which undermines the need for fringe institutions to follow sound
>lending practices.
>
>"Deposit insurance lifts the whole risk profile of lending at the
>margins," he says.
>
>Deposit insurance is widely held to be at least partly responsible for
>the 1980s Savings and Loan crisis in the US, where taxpayers' money
>was used to bail out a number of failed Savings and Loans outfits,
>similar to our credit unions.
>
>In comparison, Hossack says, there has only been one small bank
>collapse in Australia since 1890 and even then depositors lost only $1
>in every $100. More recently depositors lost nothing in the collapse
>of Victoria's Pyramid Building Society in 1990 but only because the
>Victorian Government stepped in to cover all deposits.
>
>Even with deposit insurance, bank customers could forfeit some of
>their savings in the event of a bank collapse. In the US deposit
>insurance covers deposits up to $US100,000 and there is talk of
>increasing the cap to $US200,000.
>
>What's more, if you have a US account in your own name and another in
>joint names, each account is insured up to the limit.
>
>Mo****rian says it is common for Americans to operate multiple accounts
>with deposit insurance cover in mind because, unlike Australia, bank
>collapses are a regular occurrence in the US.
>
>In Europe deposits are insured up to EUR20,000, while in Britain 90
>per cent of each deposit is insured up to a maximum of ?35,000. For
>example, someone with a $10,000 deposit would receive $9000 while
>someone with $100,000 would receive only the maximum $81,000.
>
>"One of the arguments for deposit insurance is that it prevents bank
>runs and helps governments avoid issuing blanket [depositor]
>guarantees. Both arguments were undermined at Northern Rock," Hossack
>says.
>
>One of the problems in the British and Australian systems is the
>understanding that governments will bail out customers of failed
>banks.
>
>Indeed, the British Government was forced to guarantee all deposits at
>Northern Rock to prevent a stampede of customers clamouring to
>withdraw their savings. Even with deposit protection, there is a wait
>of some months before depositors get their money and then there is a
>cap on the amount they receive. Customers were doing the rational
>thing and getting their money out while they could.
>
>The Council of Financial Regulators argues that the best way to
>cir***vent the need for government bailouts is our present system of
>depositor preference, backed up with a facility to pay depositors up
>to $20,000 quickly and the rest once the asset sale is complete.
>
>"With the current climate [of concern about a lending squeeze brought
>about the sub-prime loan crisis], it sounds rational to have deposit
>insurance but it could be an additional cost to taxpayers," Mo****rian
>says.
>****************************
Cheers, Phred.
--
ppnerkDELETE@[EMAIL PROTECTED]
|
