# Who owns your bank deposits?



## MrBurns (29 March 2013)

Seems some poor fellow lost all his savings when a bank in Cyprus folded.

The story read as if the banks creditors took the money, is that correct ? and if so would that apply here ?

So who does owns your money in the bank, you or the bank ?


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## drsmith (29 March 2013)

*Re: Who owns your bank deposits ?*

This fellow ?

http://www.smh.com.au/national/i-we...-man-i-woke-up-a-poor-man-20130328-2gxab.html


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## MrBurns (29 March 2013)

*Re: Who owns your bank deposits ?*



drsmith said:


> This fellow ?
> 
> http://www.smh.com.au/national/i-we...-man-i-woke-up-a-poor-man-20130328-2gxab.html




That's the one - 



> His money was all in the Laiki ''Popular'' Bank which was the main casualty of Cyprus' bailout package set by the European Union. Laiki is to be dismantled. Savings of less than â‚¬100,000 are to move to the Bank of Cyprus. *Anything more than that will almost certainly be wiped out as the bank is wound down, its remaining assets taken by the bank's creditors*


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## McLovin (29 March 2013)

*Re: Who owns your bank deposits ?*



MrBurns said:


> Seems some poor fellow lost all his savings when a bank in Cyprus folded.
> 
> The story read as if the banks creditors took the money, is that correct ? and if so would that apply here ?
> 
> So who does owns your money in the bank, you or the bank ?




A depositor is a creditor, more often than not, they are senior to all other creditors. If a business is insolvent, then by extension it cannot repay its creditors.


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## Garpal Gumnut (29 March 2013)

*Re: Who owns your bank deposits ?*

Money does not necessarily make one happy.

The Cypriot-Australian who lost all his dough will now no longer have to worry about it.

The bank owns your bank deposits. Possession is 9/10.

gg


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## drsmith (29 March 2013)

*Re: Who owns your bank deposits ?*

Losing it though makes one less happy. It's the consequences he has to worry about now.

Ultimately, possession is 9/10 when it comes to everything. Your gold bars are mine if my gun is bigger than yours, all other things being equal.


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## MrBurns (29 March 2013)

*Re: Who owns your bank deposits ?*



McLovin said:


> A depositor is a creditor, more often than not, they are senior to all other creditors. If a business is insolvent, then by extension it cannot repay its creditors.




The money is still there in mortgages etc surely it can't all be gone and in any case you aren't investing in the bank, you haven't got shares you have a DEPOSIT with the bank, I seem to remember something about this , that you give the money to the bank and they give you a promise to pay it back some technical jargon which may mean you don't own your money once it's deposited.



Garpal Gumnut said:


> The bank owns your bank deposits. Possession is 9/10.
> 
> gg




Possession is 9/10 correct.


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## MrBurns (29 March 2013)

Here's your answer - 



> In the audited financial statements of the bank, on the balance sheet, the $100 in currency would be shown as an asset of the bank on the left side of the balance sheet, and the deposit account would be shown as a liability owed by the bank to its customer, on the right side of the balance sheet. The bank's financial statement reflects the economic substance of the transaction””which is that the bank has actually borrowed $100 from its depositor and has contractually obliged itself to repay the customer according to the terms of the demand deposit account agreement. To offset this deposit liability,* the bank now owns the actual, physical funds deposited*, and the bank shows those funds as an asset of the bank.




http://en.wikipedia.org/wiki/Deposit_account

The bank owns your money, I'm going to think hard on this.......in these times.


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## McLovin (29 March 2013)

*Re: Who owns your bank deposits ?*



MrBurns said:


> The money is still there in mortgages etc surely it can't all be gone and in any case you aren't investing in the bank, you haven't got shares you have a DEPOSIT with the bank, I seem to remember something about this , that you give the money to the bank and they give you a promise to pay it back some technical jargon which may mean you don't own your money once it's deposited.




You can't have deposits that are 700% of GDP and have all that money tied up in mortgages, unless you want a huge housing bubble. A deposit is an at call loan to a bank. If the bank losses the money on bad mortgages, bad Greek bonds, buying magic beans at the market, then you're money is gone. Banks can have liquidity issues but this is not the case in Cyprus, the banks were/are insolvent.


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## McLovin (29 March 2013)

MrBurns said:


> Here's your answer -
> 
> 
> 
> ...




This is just basic accounting. They create a liability for the deposit and the deposit holder creates an asset for the deposit.


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## drsmith (29 March 2013)

Carrying on the above example further, the bank pays a return (interest) on that $100 deposit and then lends it to someone else at a higher interest rate thus generating a profit for the bank. If however the lender is unable to repay the $100, then obviously the bank is unable to return the $100 to the depositor and he has thus lost his money.

This is a very simplistic example, but it does illustrate effectively that like any other investment, there is a level of risk in bank deposits.


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## FlyingFox (29 March 2013)

Here is a comment on creditor preferences for depositors.

http://www.creditwritedowns.com/2013/03/ecb-creditor-preferences-bank-resolution.html


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## tinhat (29 March 2013)

*Re: Who owns your bank deposits ?*



drsmith said:


> Losing it though makes one less happy. It's the consequences he has to worry about now.
> 
> Ultimately, possession is 9/10 when it comes to everything. Your gold bars are mine if my gun is bigger than yours, all other things being equal.




Happiness is a warm gun Mumma,
Bang, bang, shoot ,shoot!



McLovin said:


> You can't have deposits that are 700% of GDP and have all that money tied up in mortgages, unless you want a huge housing bubble.



But you can lend it to the Greeks.


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## stewiejp (30 March 2013)

The bank holds the money - the customer owns it. If the same thing happened here the government guarantee would kick in. I would only be withdrawing my money from the banks if I thought both the bank would go broke, and the government would as well. 

Here - banks make a lot of money, hence they shouldn't go broke any time soon. Pretty simple really.


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## FlyingFox (30 March 2013)

stewiejp said:


> Here - banks make a lot of money, hence they shouldn't go broke any time soon. Pretty simple really.




While I agree with your sentiments. I think you have to be careful equating (Edit: current) profits and to a certain extents capital reserves directly to solvency of banks. They are highly leveraged with large exposures. It takes less than you think to make them insolvent.


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## stewiejp (30 March 2013)

true - which makes me happy the government guarantee balances up to a certain amount. They wouldn't do that it we were teetering on the edge like Cyprus


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## Julia (30 March 2013)

stewie, I'm not sure I'd have any expectation of the government ever actually meeting that commitment were one of our major banks to fall over.


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## MrBurns (30 March 2013)

Julia said:


> stewie, I'm not sure I'd have any expectation of the government ever actually meeting that commitment were one of our major banks to fall over.




I agree they'd walk away from that in an instant


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## againsthegrain (30 March 2013)

MrBurns said:


> I agree they'd walk away from that in an instant




Anybody have a idea if this was to happen which of the big banks would be most likely the first to fold?


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## McLovin (30 March 2013)

Julia said:


> stewie, I'm not sure I'd have any expectation of the government ever actually meeting that commitment were one of our major banks to fall over.




Ya think? The banks aren't that big that they couldn't be saved, unlike Cyprus.


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## Tyler Durden (30 March 2013)

Julia said:


> stewie, I'm not sure I'd have any expectation of the government ever actually meeting that commitment were one of our major banks to fall over.




Agree. Not unlike the government to break a promise.


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## MrBurns (30 March 2013)

McLovin said:


> Ya think? The banks aren't that big that they couldn't be saved, unlike Cyprus.




There's no way they could be saved, if one bank looked shaky every bank would have a run on them, it would be catastrophic.


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## ROE (30 March 2013)

too much fear  fear sells
here is some figure....if our big 4 failed the lot of them, the government is up for 
650 Billion in depositor guarantee , but that is worse case scenario as in they cant salvage any of the asset...

I say they be up for around 150-200bn 

200bn ins't too big for a country like Australia  hell right now under Gillard we racked 
up 150bn in debt already so voting labor is like bailing out our big 4 already 

so that put the figure into perspective


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## stewiejp (31 March 2013)

..... is anyone going to rush to the banks on tuesday and close all their accounts?

should I be worried? is the sky falling?


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## againsthegrain (31 March 2013)

stewiejp said:


> ..... is anyone going to rush to the banks on tuesday and close all their accounts?
> 
> should I be worried? is the sky falling?




They would probably dip into super first, I'd rather give up my scam super rather then savings


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## Garpal Gumnut (31 March 2013)

The only safe place for cash, as Malcolm Fraser famously said, when a Labor government comes to power, is under your bed.

Any bank can go bust, and the ALP is doing it's darnest to send the whole country bust.

gg


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## McLovin (31 March 2013)

ROE said:


> I say they be up for around 150-200bn
> 
> 200bn ins't too big for a country like Australia  hell right now under Gillard we racked
> up 150bn in debt already so voting labor is like bailing out our big 4 already
> ...




I reckon it would be closer to 10% of that. Citi cost the US government $45b to bailout and they had a much larger asset base than the largest AU bank. They also made a $12b profit on that bailout.


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## Ves (31 March 2013)

McLovin said:


> I reckon it would be closer to 10% of that. Citi cost the US government $45b to bailout and they had a much larger asset base than the largest AU bank. They also made a $12b profit on that bailout.



I'm sure the government could find something to sell to big foreign institutional investors like we do with everything else!


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