# Chances of a run on the banks?



## megla (19 March 2008)

I'm curious to know what would happen, considering the sub prime issue and other economic elements at play, if there was a run on a major bank?

Are we likely to see a domino effect and great changes in our market?


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## Julia (19 March 2008)

I actually asked this question when I was at the bank yesterday.
The answer (from their Financial Adviser) was that in the very unlikely  event of a major bank not being able to meet demands of depositors withdrawing funds, the RBA would step in.  This was obviously stated as "very hypothetical" and equally obviously completely unofficial.


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## Judd (19 March 2008)

Would not take too much to deal with it.  Notice that your ATM card has a daily limit on withdrawals?  Easy enough to reduce that to say $50 or $100 per day.  Same with credit card limits.  Just reduce them to a max of say $500.  Cash is still there but you cannot get at it.  Just a software change and you are frozen out of obtaining cash.  And if I can think of that scenario, do you reckon much brighter people than I am have not already thought of it and put contingency arrangements in place?  Deposit books are very much no longer in existence by the way so bad luck about withdrawing funds at a bank branch

To see the effect simply look what happened down at Eden, NSW, when the Telstra line was cut.  Absolutely no cash, no communication for two days.

PS:  And if you have money in a Cash Management trust, remember it is a trust so redemptions can be frozen.

Happy days.


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## YELNATS (19 March 2008)

Judd said:


> Would not take too much to deal with it.  Notice that your ATM card has a daily limit on withdrawals?  Easy enough to reduce that to say $50 or $100 per day.  Same with credit card limits.  Just reduce them to a max of say $500.  Cash is still there but you cannot get at it.  Just a software change and you are frozen out of obtaining cash.  And if I can think of that scenario, do you reckon much brighter people than I am have not already thought of it and put contingency arrangements in place?  Deposit books are very much no longer in existence by the way so bad luck about withdrawing funds at a bank branch
> 
> To see the effect simply look what happened down at Eden, NSW, when the Telstra line was cut.  Absolutely no cash, no communication for two days.
> 
> ...




Presumably they would lower the daily limits on funds transfers to other accounts or banks also.

Not sure about your comment about deposit books, many older people still have them, especially with CBA, and keep their life savings in them. Still they could restrict the daily withdrawal amounts from these accounts as well.

PS I work in a bank agency.


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## trading_rookie (19 March 2008)

Those CBA passbooks are a fraud paying 0.01-0.05% interest on ppl's live savings...and the CBA know it. Wish I recalled the figure from AFR but it was either in the high hunderd millions or few billions that the CBA were sitting on paying very little interest...I still have one, only for nostalgic reasons (maybe the cash in it might come in handy when the Government orders Telstra to cut all comm lines ;-) ) , and a CBA savings box in the shape of an elephant...pity you had to pry open those CBA tin bank buildings when you went to the bank as a kid, as I'd like to have kept one of those as well


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## Tysonboss1 (19 March 2008)

megla said:


> I'm curious to know what would happen, considering the sub prime issue and other economic elements at play, if there was a run on a major bank?
> 
> Are we likely to see a domino effect and great changes in our market?




The first thing that would happen would be a massive juggling act,... 

Checks would mysteriously take a few extra day's to clear, 

Shop keepers may have there credit card transaction payments delayed a day or two, 

electronic fund transfers may spend any extra day in the system.

banks that pay staff weekly may quickly change policy to pay fortnihtly,


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## tech/a (19 March 2008)

Dont know why your all worried about sub prime.

Compared to *this* its like my credit card debt and compared to our foreign debt.






Want to read more?

http://www.cornerstoneri.com/comments/TrillionDollarSecret.htm


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## CamKawa (19 March 2008)

Julia said:


> I actually asked this question when I was at the bank yesterday.
> The answer (from their Financial Adviser) was that in the very unlikely event of a major bank not being able to meet demands of depositors withdrawing funds, the RBA would step in. This was obviously stated as "very hypothetical" and equally obviously completely unofficial.



Will the RBA step in for Credit Unions? How safe are they?


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## Prospector (19 March 2008)

Credit Unions will be safe too.  This happened in SA and the state government stepped in.

Actually, what peeves me at the moment is that those of us who are not public servants, can see our Super Fund monies disappearing.  So we are not guaranteed any final settlement amount (unless it has already been converted to cash of course).  But in SA the Govt has said that it has lost, I think he said over a billion dollars since the recent fall, but every Public Servant knows exactly what they will receive on retirement as it is guaranteed.  And it isnt as though they have meager salaries, nor are subject to redundancy issues like us mere mortals!


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## GreatPig (19 March 2008)

Judd said:


> And if I can think of that scenario, do you reckon much brighter people than I am have not already thought of it



Dunno about brighter, but Citibank in NY already implemented such a scheme a while ago. Not sure if it's still in force though.

GP


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## GreatPig (19 March 2008)

Julia said:


> the RBA would step in



This is on the assumption that the RBA would have the capacity to do anything about it.

If the mess Tech/a mentioned gets the rug pulled from under it, and I'm sure there's something similar (although a somewhat smaller amount) in Australia, then even the RBA might be crying poor.

Of course they could print more money, but that doesn't go anywhere nice either.

GP


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## reece55 (19 March 2008)

tech/a said:


> Dont know why your all worried about sub prime.
> 
> Compared to *this* its like my credit card debt and compared to our foreign debt.
> 
> ...




Tech
The chart above explains why the Fed bailed out good ole Bear Sterns - they have about 10 Bil of that 180 themselves. Oh, and this is what we see in their annual reports - what about SIV's that don't count in consolidation - I wonder what is hiding there......

Mac Bank here in Aus has about 1 Bil, which I think is Aus's largest exposure...

Cheers


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## Buster (19 March 2008)

Hey P!



Prospector said:


> what peeves me at the moment is that those of us who are not public servants, can see our Super Fund monies disappearing.




I'm a (new) PS.. and my super, which I transferred just 12 months ago, is definitely going the gurgler way..  Not sure what you mean??  Have I missed something..??

Cheers,

Buster


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## tech/a (19 March 2008)

reece55 said:


> Tech
> The chart above explains why the Fed bailed out good ole Bear Sterns - they have about 10 Bil of that 180 themselves. Oh, and this is what we see in their annual reports - what about SIV's that don't count in consolidation - I wonder what is hiding there......
> 
> Mac Bank here in Aus has about 1 Bil, which I think is Aus's largest exposure...
> ...




Read the artical *AGAIN
*

Thats TRILLIONS not *BILLIONS*
get your head around this.

Billions X 1000


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## Aussiejeff (19 March 2008)

tech/a said:


> Read the artical *AGAIN
> *
> 
> Thats TRILLIONS not *BILLIONS*
> ...




No good tech/a. You've hit the wall. It's a figure too far......just too hard to fathom.... migraine inducing.

*sigh*


AJ


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## reece55 (19 March 2008)

tech/a said:


> Read the artical *AGAIN
> *
> 
> Thats TRILLIONS not *BILLIONS*
> ...




Sorry Tech, I meant trillions......... I was aware, just didn't type it out right, quick post at work....

Cheers
Reece


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## explod (19 March 2008)

Aussiejeff said:


> No good tech/a. You've hit the wall. It's a figure too far......just too hard to fathom.... migraine inducing.
> 
> *sigh*
> 
> ...




A good clear article for a change.   The Privateer newsletter, published in Australia has readers up to speed at this depth and I have found that my most valuable source for solid economic understanding, not that I assert full understanding, far from it.

But yeh, the figures, a bit like trying to come to terms with a million light years away, or the end of infinity.


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## megla (19 March 2008)

I think there is some blind faith being held in the RBA.

There have been a few banks recently that have run into issues with running out of cash. With the Bear thing in the US and .. Northern Rock (?) in UK ... my thoughts are if its happening elsewhere it can happen here.

I have cashed in most of my shares and have built up some standard bank savings, which I now consider at risk. But in the event of one of the big four running out of money, what is realistically likely to happen? I think the RBA could only do so much, same as the US fed, which I think is probably getting close to the bone by now.

Now I'm not fear mongering, just looking at potential risks to determine alternatives.


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## tech/a (19 March 2008)

I hear mattress sales are on the rise.


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## Pager (19 March 2008)

megla said:


> I think there is some blind faith being held in the RBA.
> 
> There have been a few banks recently that have run into issues with running out of cash. With the Bear thing in the US and .. Northern Rock (?) in UK ... my thoughts are if its happening elsewhere it can happen here.




It has, look no further than RAMS


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## wayneL (19 March 2008)

HBOS in the UK is having to defend itself against rumours that it is in deep doodoo. HBOS owns Bankwest.

Just a heads-up folks.


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## Mofra (19 March 2008)

wayneL said:


> HBOS in the UK is having to defend itself against rumours that it is in deep doodoo. HBOS owns Bankwest.
> 
> Just a heads-up folks.




For another indicator of real market risk in Australia, the securitisation table is a reasonably accurate tool - with AUD$22b+ Macq. bank _was_ no 1 - now they have killed of their mortgage origination for new deals due to funding issues.

St George & Adelaide Bank are fairly high on that table, so you can guess what I said last week when I was offered a role at St George


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## Prospector (19 March 2008)

Buster said:


> Hey P!
> I'm a (new) PS.. and my super, which I transferred just 12 months ago, is definitely going the gurgler way..  Not sure what you mean??  Have I missed something..??
> 
> Cheers,
> ...




In SA, public servants are guaranteed a certain percentage of the salary (or an amount less tax) as a retirement income.  Any super you may have transferred prior to joining may be treated differently though!


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## reece55 (19 March 2008)

Mofra said:


> For another indicator of real market risk in Australia, the securitisation table is a reasonably accurate tool - with AUD$22b+ Macq. bank _was_ no 1 - now they have killed of their mortgage origination for new deals due to funding issues.
> 
> St George & Adelaide Bank are fairly high on that table, so you can guess what I said last week when I was offered a role at St George




Funny you say that Mofra, I had a few mates in ADB's securitisation department, looks like they have downscaled their staff or are at least adjusting. One of them has been moved into money markets and the other is leaving...... 

Also, looking through Bendigo's latest half yearly report, a very large proportion of their funding for their securitisation assets that were previously funded by either term or sales are now warehoused (say 50% now and they have about a 14 Bil book).... it must be costing them a lot more now....

Cheers


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## Prospector (19 March 2008)

reece55 said:


> Funny you say that Mofra, I had a few mates in ADB's securitisation department, looks like they have downscaled their staff or are at least adjusting. One of them has been moved into money markets and the other is leaving......




Wouldnt you expect that to happen when two companies merge?  Duplication and all that?


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## Mofra (19 March 2008)

reece55 said:


> Funny you say that Mofra, I had a few mates in ADB's securitisation department, looks like they have downscaled their staff or are at least adjusting. One of them has been moved into money markets and the other is leaving......
> 
> Also, looking through Bendigo's latest half yearly report, a very large proportion of their funding for their securitisation assets that were previously funded by either term or sales are now warehoused (say 50% now and they have about a 14 Bil book).... it must be costing them a lot more now....
> 
> Cheers



reece - your mates would be telling you exactly how it is, as I know people in treasuries who are absolutely gobsmacked at the current situation _even taking into account the subprime crisis_. 

The problem isn't just the longer term warehousing of the debt - it's the fact that now the warehouses themselves are falling over. CBA had even offered to warehouse A1 prime debt within Australia & have now pulled the plug as you just can't shift the debt _anywhere_ at the moment. The Societe Generale meltdown has hit harder than many expect  - US CDO/MBS's are dead enough without currency risk entering the fray (is "deader" a word?


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## reece55 (19 March 2008)

Prospector said:


> Wouldnt you expect that to happen when two companies merge?  Duplication and all that?




BEN didn't have any securitisation expertise, so no I didn't actually expect that at all........ Any movement in staff and/or downsizing would indicate to me a reduction in activity, not merger issues. Proof in the pudding is the funding mix in 2007 compared with 2006...... 

Cheers


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## vishalt (19 March 2008)

God **** America.

Everything has to be gunned down because America said so, and because we have typical westerner hive minds we have the same ill-disciplined companies (if anything they have been LUCKY to avoid sub-prime) and debt levels as addictive. 

But hey when the US says its time to sour on them the world needs to follow!


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## Prospector (19 March 2008)

reece55 said:


> BEN didn't have any securitisation expertise, so no I didn't actually expect that at all........ Any movement in staff and/or downsizing would indicate to me a reduction in activity, not merger issues. Proof in the pudding is the funding mix in 2007 compared with 2006......
> 
> Cheers




Ok, so that would be a good thing for the BenAd Bank to do then, and not necessarily an indication of imminent danger (need to have a smiley for praying!)



vishalt said:


> God **** America.




No need for God's help, they are most able to do it to themselves.


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## wayneL (19 March 2008)

wayneL said:


> HBOS in the UK is having to defend itself against rumours that it is in deep doodoo. HBOS owns Bankwest.
> 
> Just a heads-up folks.



OK, the latest rumour is that the HBOS rumour was just a rumour. The bank is now rumoured to be OK. :


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## reece55 (19 March 2008)

Prospector said:


> Ok, so that would be a good thing for the BenAd Bank to do then, and not necessarily an indication of imminent danger (need to have a smiley for praying!)
> 
> 
> 
> No need for God's help, they are most able to do it to themselves.




Read what Mofra is saying about warehousing and review the BEN share price chart - the answer lies in both. I highly doubt that an Australian bank would go under, but 14 Bil is a lot of debt to fund if you can't even warehouse it!!!!!

Cheers


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## reece55 (19 March 2008)

wayneL said:


> OK, the latest rumour is that the HBOS rumour was just a rumour. The bank is now rumoured to be OK. :




Ha.... There is still a few hours before close, down 8% so far after dropping through the 400 mark....... ouch..... Perhaps another flip flop before close? By the way, tonights blip is a new 5 year low...... owie.....

Cheers


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## Kimosabi (19 March 2008)

Well, if there is a bank run in Australia, you'd want to get in quick.  That skinny little line down the bottom of the graph is physical cash...


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## chops_a_must (20 March 2008)

Prospector said:


> Credit Unions will be safe too.  This happened in SA and the state government stepped in.
> 
> Actually, what peeves me at the moment is that those of us who are not public servants, can see our Super Fund monies disappearing.  So we are not guaranteed any final settlement amount (unless it has already been converted to cash of course).  But in SA the Govt has said that it has lost, I think he said over a billion dollars since the recent fall, but every Public Servant knows exactly what they will receive on retirement as it is guaranteed.  And it isnt as though they have meager salaries, nor are subject to redundancy issues like us mere mortals!




Yeah, I reckon that is bollocks.

The WA public servants were recently, not so overtly made aware that their super funds were heavily exposed to CNP.

A reason why they are now asking a hell of a lot more than they were a few months back? You betcha...

P.S. - I'd argue most public servants are paid between about 50-75% of their market value.

Cheers.


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## nioka (20 March 2008)

chops_a_must said:


> P.S. - I'd argue most public servants are paid between about 50-75% of their market value.
> 
> Cheers.



 Maybe that is because it matches their work rate.


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## chops_a_must (20 March 2008)

nioka said:


> Maybe that is because it matches their work rate.



I know quote a few and they all work damn hard.

You generally aren't there if you don't care about what you are doing. Especially at the moment where key departments are so short staffed it really isn't funny...


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## Prospector (20 March 2008)

chops_a_must said:


> Yeah, I reckon that is bollocks.
> The WA public servants were recently, not so overtly made aware that their super funds were heavily exposed to CNP.




Well, maybe you need to check out what is happening in SA and not WA then, as I said in the post.  The risk is held by SA taxpayers and not the superannuants.  Bollocks.


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## chops_a_must (20 March 2008)

Prospector said:


> Well, maybe you need to check out what is happening in SA and not WA then, as I said in the post.  The risk is held by SA taxpayers and not the superannuants.  Bollocks.




Sorry.

From the way you wrote it, or the way I read it, sounded like it was being extrapolated to all public servants Australia wide.

I must have read 1500 pages in the last week... so I'm getting short. 

I apologise if that's not how it was intended.

P.S. - Do you think SA would have any hope of getting people/ keeping people with the correct qualifications in the public service unless they had carrots like that?


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