# Bank Deposit Guarantee = BAD NEWS



## numbercruncher (21 October 2008)

Cant find the thread someone else made but my input was I thought guranteeing bank deposits to an UNLIMITED amount was a really bad idea.

Since then ive seen several others in the media saying the same thing, now the RBA is weighing in.

The amount has to be capped !

Further to this article from the RBA I would ask, does our Government have any hope in hell of repaying all the deposits ? in the worst case scenario ? .....

Further in making hasty decisions labor is getting a trigger happy reputation, as much as I dont like the liberal party ( in the form that lost the last election ) I dont think they would of implemented this policy the same as labor has.




> Reserve Bank governor Glenn Stevens is warning the federal government its guarantee of bank deposits must be changed.
> 
> The government ignored the RBA's concerns about the impact of an unlimited guarantee scheme for all Australian deposit-taking institutions from October 12.
> 
> ...




http://au.news.yahoo.com/a/-/latest/5092398/rba-warns-govt-deposit-guarantee/


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## ROE (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



numbercruncher said:


> Cant find the thread someone else made but my input was I thought guranteeing bank deposits to an UNLIMITED amount was a really bad idea.
> 
> Since then ive seen several others in the media saying the same thing, now the RBA is weighing in.
> 
> ...




So namely investment banks are stuffed that why they lobby to have it change, their model is based on leverage and other people money, I say keep it that way and protect mum and dads rather than the big boys.

Let them lose for a change to weed out the weak and let strong survive 
reward company that has low debt and make real profit rather than cheap debt and inflated asset.


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## Green08 (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



> Cant find the thread someone else made but my input was I thought guranteeing bank deposits to an UNLIMITED amount was a really bad idea.




Hi how is your leg healing?

Prospertor started this thread

This Bank guarantee thing..... ( 1 2 3 4) last up dated 13th October

Not completely relevant to yours though there is some information which would be useful

Hope you get better soon


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## theasxgorilla (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



numbercruncher said:


> Cant find the thread someone else made but my input was I thought guranteeing bank deposits to an UNLIMITED amount was a really bad idea.




Rudd = amateur.


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## explod (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*

The Future Fund has provided $3 billion for Australian and overseas banks.

This is a national disgrace.  Sure we need to be ready to support the banks but why have we jumped in so quick.   This Government in blindly following the folly of the US sends a clear message that it does not have a clue.   Turnbull will be laughing all the way to the next election.  And I think he is pretty smart by the way.


BADNEWS alright, I cant' believe it.   I'd have thought they would have thought for themselves a bit, but the privately owned banking cartels (the money) rules.  As a supporter of the Labor Party for 45 years they have finally lost me. 

Shake my head, shake my head, shake my head.


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## MrBurns (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*

This is a major stuff up by Rudd, why didn't Wayne Swann stop this from happening after all he's the Treasurer of Australia and should know about these things ????? (yes that was a joke Swanny wouldn't know if a tram was up him till the bell rang)

How the hell is he going to get out of this ?

If he backflips it will be the greatest backflip ever seen outside of SeaWorld. it will cause major disruption and completely expose the Govt for the incompetents they are.


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## numbercruncher (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



Green08 said:


> Hi how is your leg healing?
> 
> Prospertor started this thread
> 
> ...





Heya Green 

Many thanks for asking - perhaps I should of updated the leg thread that Julia thoughtfully started incase any where curious !

Ive ending up getting a multi resistant staff infection to boot and put on a antibiotic drip, thursday I get my external fixation removed and my Tibula plated and screwed back together ...... sigh ... lol ...... sounds scary , includes key hole cameras, but I have a doctor organised whos a specialist !

My accident happened on my way home from my part time job with Queensland fire and Rescue and they have been awesome, loads of support - but its going to be a long time before i can go operational - Firies on crutches doesnt work apparently lol


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## mayk (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*

From the age 




> ...guarantee the country's entire deposit base of $600-$700 million...



http://business.theage.com.au/busin...arantee-distortions-report-20081021-54yi.html

I am first of all shocked that the amount is so low? if it is under a billion dollar then no need for a cap I guess. Have they screwed up? is it billion instead of million?


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## gfresh (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*

The deposit guarantee was rushed in to stop a run on banks *that was already happening* during that particular week at the worst of the crisis. Within probably a couple of weeks one or two of our major institutions would have fallen over. 

This is why it was rushed in. 

Tax payers foot the bill in the end if were to happen. We're all guaranteeing our own deposits anyhow 

Liberals would have done *exactly* the same thing during such an emergency, and Turnbull supported the entire thing, so don't get too political about it.


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## treefrog (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*

As the ship SS Ozzie Financials heads into port at an unusually risky angle, the captain decides they need an extra rope to dock safely. The deckhands rush below and get a new piece of rope but it first must be spliced to stop it fraying and make it servicable. There is time to do this but the deckhands are new and have not done this before: they end up with a completely unservicable rope and the ship much closer...............


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## numbercruncher (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



> guarantee the country's entire deposit base of $600-$700 million...




that has to be wrong - I see the media littered with errors lately obviously they are cost cutting. If its not wrong we are royally screwed.


22mil Australians with savings of 30 bucks each ?


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## Ageo (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



gfresh said:


> The deposit guarantee was rushed in to stop a run on banks *that was already happening* during that particular week at the worst of the crisis. Within probably a couple of weeks one or two of our major institutions would have fallen over.
> 
> This is why it was rushed in.
> 
> ...




The only reason they guaranteed all deposits (as i mentioned in another post) was to restore confidence in the banking system so people would continue to deposit money, even thow there is no way in the world the government could ever cover all deposits if something major would happen unless they borrowed the money.....

So if the worst were to happen tax payers wouldnt have no where near the amount to cover, so it would be off to the printing press (reserve bank). The government is taking a big risk to restore confidence and praying that everyone doesnt do a bank run..


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## Aussiejeff (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



numbercruncher said:


> that has to be wrong - I see the media littered with errors lately obviously they are cost cutting. If its not wrong we are royally screwed.
> 
> 
> 22mil Australians with savings of 30 bucks each ?




I would have thought it was more like *$29.99*....  

Bummer with the infection. Sounds like you are dancing the usual hospital _"2 steps forward - 1 step back" _Rhumba... LOL

For me, thankfully the swelling and pain associated with the fibula break has subsided to the point where I can dispense with the crutches for short periods **YAY!!** and hobble around with my late mum's walking stick until the ankle says "enough".

Only 2 more weeks till plaster comes off. I've managed to bodgy up an old sandal by lengthening the straps so it barely fits the bottom of the plaster cast - makes hobbling much easier 

Anyhoo, you are on the road to recovery and that's the main thing!

Cheers,


aj


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## Boggo (21 October 2008)

I reckon Jefferson was around the mark !


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## gav (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



numbercruncher said:


> that has to be wrong - I see the media littered with errors lately obviously they are cost cutting. If its not wrong we are royally screwed.
> 
> 
> 22mil Australians with savings of 30 bucks each ?




I believe its 700 BILLION, not million.  At the bottom of this article.

http://www.businessday.com.au/business/challenger-in-a-fix-20081021-553q.html


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## numbercruncher (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



Aussiejeff said:


> I would have thought it was more like *$29.99*....
> 
> Bummer with the infection. Sounds like you are dancing the usual hospital _"2 steps forward - 1 step back" _Rhumba... LOL
> 
> ...






Heya AJ - well done on all your progress mate , cant wait to be at your level , actually cant wait to escape this hospital and get some fresh air lol ... one step at a time i guess @

Good work on the shoe invention to ..... anything to make things a little easier hey


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## nunthewiser (21 October 2008)

Hi can someone please confirm WHAT ozzie banks are covered , at what max amount and are building societys covered ? a lot of different info on tv and only caught part of it , last time i heard it was ALL banks and building societys !! 

is BEN covered?


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## nunthewiser (21 October 2008)

ok trawled thru all my usual resourses and cant find anything contrary to original guarantee from pm so just put it down to missus wantin me to do dishes and she tried to scare me off the chair..


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## Aussiejeff (21 October 2008)

nunthewiser said:


> ok trawled thru all my usual resourses and cant find anything contrary to original guarantee from pm so just put it down to missus wantin me to do dishes and she tried to scare me off the chair..




Obviously, you are still nunthewiser....


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## nunthewiser (21 October 2008)

Aussiejeff said:


> Obviously, you are still nunthewiser....




obviously no one else here can produce evidence to the contrary about the PM guarentee either so i think own research often seems to be a wiser plan


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## robots (21 October 2008)

hello,

all bank, building society's etc members equity, bendigo, BoQ, 

no trusts, debentures, ie mortgage trusts, cash management trusts etc

thankyou
robots


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## nunthewiser (21 October 2008)

personally tho ........ i wouldnt trust the guarantee as far as i could throw it ...


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## nunthewiser (21 October 2008)

robots said:


> hello,
> 
> all bank, building society's etc members equity, bendigo, BoQ,
> 
> ...




yeah m8 , thats how i originally read it too , i think someone just tried to put a scare up me 

cheers have a great evening


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## Indie (21 October 2008)

I've heard the total of deposits is around $1.3tr. 

Australia was at a huge disadvantage if it didn't follow the lead of other developed economies so Rudd's hand was forced on this. The currency has stopped falling since - for now. Anyhow, it's a crazy promise IMO. 

Here's a list of those that are guaranteed and those that are not.


The following deposits are included in this guarantee:

Conventional cheque accounts
Conventional call accounts
Conventional saving accounts
Conventional term deposits
Farm management deposits
Cash management accounts
Pass-book savings accounts
Personal current account bearing interest electronic access (whether or not account also has cheque access)
Personal current at call account bearing interest with cheque and high transaction capabilities
Personal basic account
Personal at call account, not earning interest, but with high transaction capabilities
Pensioner deeming accounts
At call cash management and savings account (earning high yield with limited transaction capability)
Standard fixed rate term deposit
Bonus incentive investment accounts
Debit card accounts
(Separate) mortgage offset accounts.  Can be either 100 per cent or partial offset.
Trustee accounts
Other transaction accounts
Retirement savings accounts (at call and term RSAs)
First home savers accounts
This is not an exhaustive list.

List of Eligible Institutions for the Guarantee of Wholesale Funding and the Guarantee of Deposits 
Australian-owned banks

Adelaide Bank Limited
AMP Bank Limited
Australia and New Zealand Banking Group Limited
Bank of Queensland Limited
Bendigo and Adelaide Bank Limited
Commonwealth Bank of Australia
Commonwealth Development Bank of Australia Limited (a subsidiary of Commonwealth Bank of Australia)
Elders Rural Bank Limited
Macquarie Bank Limited
Members Equity Bank Pty Limited
National Australia Bank Limited
St. George Bank Limited
Suncorp-Metway Limited
Westpac Banking Corporation

Building Societies

ABS Building Society Ltd
B & E Ltd
Greater Building Society Ltd
Heritage Building Society Limited
Home Building Society Ltd
Hume Building Society Ltd
IMB Ltd
Lifeplan Australia Building Society Limited
Maitland Mutual Building Society Limited
Newcastle Permanent Building Society Limited
The Rock Building Society Limited
Wide Bay Australia Ltd

Credit Unions

Alliance One Credit Union Ltd
AMP Credit Union Ltd
Austral Credit Union Limited
Australian Central Credit Union Ltd
Australian Country Credit Union Ltd (trading as Reliance Credit Union)
Australian Defence Credit Union Limited
AWA Credit Union Limited
Bananacoast Community Credit Union Ltd
Bankstown City Credit Union Ltd
Berrima District Credit Union Ltd
Big Sky Credit Union Ltd
Broadway Credit Union Ltd
CAPE Credit Union Limited
Capital Credit Union Ltd
Capricornia Credit Union Ltd
Central Murray Credit Union Limited
Central West Credit Union Limited
Circle Credit Co-operative Limited
Coastline Credit Union Limited
Collie Miners Credit Union Ltd
Community Alliance Credit Union Limited
Community CPS Australia Limited
Community First Credit Union Limited
Companion Credit Union Limited
Comtax Credit Union Limited
Country First Credit Union Ltd
Credit Union Australia Ltd
CSR and Rinker Employees Credit Union Limited
Defence Force Credit Union Limited
Dnister Ukrainian Credit Co-operative Limited
Electricity Credit Union Ltd
Encompass Credit Union Limited
Esso Employees' Credit Union Ltd
Eurobodalla Credit Union Ltd
Family First Credit Union Limited
Fire Brigades Employees' Credit Union Limited
Fire Service Credit Union Limited
Firefighters & Affiliates Credit Co-operative Limited
First Choice Credit Union Ltd
First Option Credit Union Limited
Fitzroy & Carlton Community Credit Co-operative Limited
Ford Co-operative Credit Society Limited
Gateway Credit Union Ltd
Geelong & District Credit Co-operative Society Limited
GMH (Employees) Q.W.L. Credit Co-operative Limited
Goldfields Credit Union Ltd
Gosford City Credit Union Limited
Goulburn Murray Credit Union Co-operative Limited
H.M.C. Staff Credit Union Ltd
Heritage Isle Credit Union Limited
Holiday Coast Credit Union Ltd
Horizon Credit Union Ltd
Hunter Mutual Limited
Hunter United Employees' Credit Union Limited
Industries Mutual Credit Union Limited
Intech Credit Union Limited
Karpaty Ukrainian Credit Union Limited
La Trobe Country Credit Co-operative Limited
La Trobe University Credit Union Co-operative Limited
Laboratories Credit Union Limited
Latvian Australian Credit Co-operative Society Limited
Lithuanian Co-operative Credit Society "Talka" Limited
Lysaght Credit Union Ltd
MacArthur Credit Union Ltd
Macquarie Credit Union Limited
Maleny and District Community Credit Union Limited
Manly Warringah Credit Union Limited
Maritime, Mining & Power Credit Union Limited
Maroondah Credit Union Ltd
MECU Limited
Melbourne University Credit Union Limited
MemberFirst Credit Union Limited
MyState Financial Credit Union of Tasmania Limited
New England Credit Union Ltd
Newcom Colliery Employees Credit Union Ltd
Northern Inland Credit Union Limited
Nova Credit Union Limited
NSW Teachers Credit Union Ltd
Old Gold Credit Union Co-operative Limited
Orange Credit Union Limited
Phoenix (N.S.W.) Credit Union Limited
Plenty Credit Co-operative Limited
Police & Nurses Credit Society Limited
Police Association Credit Co-operative Limited
Police Credit Union Limited
Polish Community Credit Union Ltd
Powerstate Credit Union Ltd
Pulse Credit Union Limited
Qantas Staff Credit Union Limited
Queensland Country Credit Union Limited
Queensland Police Credit Union Limited
Queensland Professional Credit Union Ltd
Queensland Teachers' Credit Union Limited
Queenslanders Credit Union Limited
Railways Credit Union Limited
RegionalOne Credit Union Limited
Resources Credit Union Limited
R.T.A. Staff Credit Union Limited
Satisfac Direct Credit Union Limited
Savings and Loans Credit Union (S.A.) Ltd
Select Credit Union Limited
Service One Credit Union Limited
SGE Credit Union Limited
Shell Employees' Credit Union Limited
South West Slopes Credit Union Ltd
Southern Cross Credit Union Ltd
South-West Credit Union Co-operative Limited
St Mary's Swan Hill Co-operative Credit Society Limited
StateWest Financial Services Limited
Sutherland Credit Union Ltd
Sutherland Shire Council Employees' Credit Union Ltd
Sydney Credit Union Ltd
Tartan Credit Union Ltd
The Broken Hill Community Credit Union Ltd
The Gympie Credit Union Ltd
The Police Department Employees' Credit Union Limited
The Summerland Credit Union Limited
The TAFE and Community Credit Union Ltd
The University Credit Society Limited
Traditional Credit Union Limited
TransComm Credit Co-operative Limited
United Credit Union Limited
Victoria Teachers Credit Union Limited
Wagga Mutual Credit Union Ltd
Warwick Credit Union Ltd
WAW Credit Union Co-operative Limited
Westax Credit Society Ltd
Woolworths Employees' Credit Union Limited
Wyong Council Credit Union Ltd

Other ADIs

Cairns Penny Savings & Loans Limited
Australian Settlements Limited
Cuscal Limited
Indue Ltd

Foreign subsidiary banks

Arab Bank Australia Limited
Bank of China (Australia) Limited
Bank of Cyprus Australia Limited
BankWest (the trading name of Bank of Western Australia Ltd, a foreign subsidiary bank following its sale to Bank of Scotland in December 1995)
Citigroup Pty Limited
HSBC Bank Australia Limited
ING Bank (Australia) Limited
Investec Bank (Australia) Limited
Laiki Bank (Australia) Ltd
Rabobank Australia Limited (a subsidiary of Rabobank Nederland from October 1994)



These institutions below are authorised depository institutions but from our understanding are NOT included in guarantee scheme

Branches of Foreign Banks

ABN AMRO Bank N.V.
Allied Irish Banks, Public Limited Company
Bank of America, National Association
Bank of China Limited
Bank of Scotland plc 
Bank of Tokyo-Mitsubishi UFJ, Ltd
Barclays Capital (the trading name of Barclays Bank plc)
BNP Paribas
09 December 1992
18 September 1986
Citibank, N.A.
Credit Suisse
Deutsche Bank Aktiengessellschaft
Fortis Bank SA/NV
HSBC Bank plc
Industrial and Commercial Bank of China Limited
ING Bank N.V.
JPMorgan Chase Bank, National Association
Mega International Commercial Bank Co., Ltd.
Mizuho Corporate Bank, Ltd.
Oversea-Chinese Banking Corporation Limited
Rabobank Nederland (the trading name of Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.)
Royal Bank of Canada
SociÃ©tÃ© GÃ©nÃ©rale
Standard Bank Plc
Standard Chartered Bank
State Bank of India
State Street Bank and Trust Company
Sumitomo Mitsui Banking Corporation
The Hongkong and Shanghai Banking Corporation Limited
The Royal Bank of Scotland Plc
The Toronto-Dominion Bank
Taiwan Business Bank
UBS AG
United Overseas Bank Limited
WestLB AG


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## nunthewiser (21 October 2008)

Indie said:


> I've heard the total of deposits is around $1.3tr.
> 
> Australia was at a huge disadvantage if it didn't follow the lead of other developed economies so Rudd's hand was forced on this. The currency has stopped falling since - for now. Anyhow, it's a crazy promise IMO.
> 
> ...





your a star thankyou for that list

cheers


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## generalofthearmy (21 October 2008)

numbercruncher said:


> Cant find the thread someone else made but my input was I thought guranteeing bank deposits to an UNLIMITED amount was a really bad idea.
> 
> Since then ive seen several others in the media saying the same thing, now the RBA is weighing in.
> 
> ...





ACTUALLY, THE IDEA OF AN UNLIMITED GUARANTEE IS TO PREVENT A PROBLEM OF COLLAPSE AND PAYOUTS IN THE FIRST PLACE SO IT MAY WORK OUT CHEAPER THAN A CAPPED PLAN. 

THANKS.


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## Smurf1976 (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



treefrog said:


> There is time to do this but the deckhands are new and have not done this before: they end up with a completely unservicable rope and the ship much closer...............



Trouble is, there's nobody alive who _has_ done it before so we've got not choice but to learn on the job.


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## MrBurns (21 October 2008)

*Re: Bank Deposit Guarantee = BADNEWS ...*



Smurf1976 said:


> Trouble is, there's nobody alive who _has_ done it before so we've got not choice but to learn on the job.




I presume Super Funds in cash in TD's are included ?

If it does hit the fan the guarantee may be worthless, there's no money to cover it all.


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## shaunQ (22 October 2008)

Although there may be some consequences from the guarentee, I think overall it was a sensible approach. Many people were concerned and were ringing radio stations talking about putting money under their beds etc. 

When a $20K limit was suggested by Labor, Turnball, in typical self serving style, harped on and tried to make a political point saying it should be $100K.

I saw someone ring SkyBusiness Your Money, Your Call and said well should I seperate my fathers $500K into 5 accounts - so its covered? 

Well, what was Labor to do? No matter what they said, it wouldn't have been enough, and now its too much. He DID discuss it with the RBA and the governor had agreed with it.

Unlimited gurantees stops all fear in the community, but most importantly it was a tactical move by Labor to counter Turnball. 

Just as the Economic Stimulus blessed their voting base, Working Families, and resolved the Pensioner payment nonsense started again, by the ever noisy twit called Turnball.

I am no staunch Labor supporter, but frankly this isn't the time to be running around being distruptive and nit picking every thing. If there is a problem, lets fix it, not jump around the media circus pointing fingers.

Rudd's support has increased, and I think finally Labor are learning how to play politics. If Turnball, and the Liberals generally keep going the way they are, I reckon Labor will cruise it in next election, with an increased majority.


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## CamKawa (22 October 2008)

Kevin Rudd to change blanket guarantee on bank deposits

"SUPER rich Australians with more than $1 million in the bank will be forced to pay insurance to guarantee their savings"

Anyone know how much the insurance will cost?


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## GreatPig (22 October 2008)

Indie said:


> BankWest (the trading name of Bank of Western Australia Ltd, a foreign subsidiary bank following its sale to Bank of Scotland in December 1995)



Now - or very soon to be - a subsidiary of Commonwealth Bank.

GP


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## theasxgorilla (22 October 2008)

shaunQ said:


> When a $20K limit was suggested by Labor, Turnball, in typical self serving style, harped on and tried to make a political point saying it should be $100K.




No, actually, I think he was probably making an educated point.  Sweden moved to guarentee 500,000 SEK, or approximately 100,000 AUD.  

For interest sake, the most overvalued currency in the G10 bloc of currencies according to Danske bank is the SEK.  The most undervalued is the AUD.  This disparity has shortened by some 13% since Rudd's announcement the weekend before last, but unfortunately the policy was lacking finesse.  

He thought he'd issue a knock-out blow to the AUD-killing guarantees by governments like Germany, Ireland and Sweden.  Instead he has succeeded in drawing funds away from investment banks, who can ill afford the capitalisation problems, and into guaranteed vehicles like term deposits.

It's fine to encourage saving and protect the AUD (lest inflation really starts to bite as interest rates come down), but his team failed to meter the consequences of their policy properly.


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## Ageo (22 October 2008)

I heard on the news late last night there was 1 bank that froze accounts and wouldnt allow and withdrawals? also challenger  said people could get their money it just would take a while...

here is some info on it but cant find much

http://www.infochoice.com.au/Home/NewsViews/tabid/99/Default.aspx?ArticleId=35059&count=10


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## Kauri (22 October 2008)

Rudd must read this forum.... he has taken note and is going to ammend the scheme...   

Cheers
..........Kauri


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## Uncle Festivus (22 October 2008)

Hmmmm..... 7 BILLION $100 notes? I'd like to see that printing press!

Both Turnbull & Rudd know it's financial rhetoric designed to placate the ignorant or uninformed ie most of the population. Expect to see it get watered down even further?


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## Julia (22 October 2008)

The obvious consequence of the bank guarantee is money moving from cash management trusts and mortgage trusts into the safe bank deposits.

Unsurprisingly these organisations are protesting that the legislation is unfair and want the government to guarantee all their deposits as well!

What about the moral hazard here?   If the guarantee is extended to market linked investments, i.e. Challenger, what is to stop people and companies taking extraordinary risks, safe in the knowledge that they will be bailed out?

e.g. remember Fincorp?


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## Julia (22 October 2008)

Given Ken Henry's emphatic assertion that the Reserve Bank approved the government's guarantee announcement a couple of weekends ago, Malcolm Turnbull and Julie Bishop look more than a little silly in the face of their overblown rhetoric during the past few days.


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## gfresh (22 October 2008)

From what I can gather, the key issue comes down to different forms of regulation and oversight when it comes down to mortgage funds or cash management trusts which excluded them from the scheme. 

Traditional depository institutions in Australia are overseen by APRA, those other funds are not. This is why they were left out. 

Unless the others wish to sit down to be fully regulated by APRA, they are never going to get any sort of guarantee from the government. For some I'd imagine it would be almost impossible, as they have to subject themselves to BASEL II requirements for strict ratios of capital, methods of reporting and things such as this. Not something they can change quickly. 

Government's position seems to be that unless it's APRA monitored, they would not covered. Given that these are apparently given to the strictest regulation and monitoring, the Government wouldn't want to involve themselves with anything else due to risk. 

The guarantee also effectively put a stop to many possible mergers which seemed on the cusp of occurring (ANZ+NAB was mentioned, Suncorp+CBA), which for the financial consumer probably would have meant reduced competition, and the same issue of moral hazard in the long run - this time even larger institutions "too large to fail". Once you know you're in this group, you are probably going to take more risks also.. e.g. Freddie Mac & Freddie Mae in the US

It's a curly one..


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## Uncle Festivus (22 October 2008)

Julia said:


> What about the moral hazard here?   If the guarantee is extended to market linked investments, i.e. Challenger, what is to stop people and companies taking extraordinary risks, safe in the knowledge that they will be bailed out?
> 
> e.g. remember Fincorp?




No moral hazard when they know that the promise can't be kept. As long as there is even a credible assumption that our money is safe it should suffice, but bottom line is if there was a genuine run on the banks they (the government) cannot possibly hope to cover/guarantee  it.


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## Sir Osisofliver (22 October 2008)

Ha! Time for the shakedown!!!!!

So there is a fee to large depositors? Over $1m gets a fee.

Great..lets strip out the rhetoric and bull**** and this is what I hear...

Swan "The very simple answer is the fee will be paid by all depositors. either the fee will be paid by the depositor, or the bank."

Sir O "Oh **** we can't guarantee this amount of funds....stuff it we'll turn it into a tax instead."

_THE proposed government levy for guaranteeing bank deposits of more than $1 million will be charged regardless of whether the investor wants it or not. Wayne Swan said today the new revenue raiser, which the Australian Bankers Association has described as a tax, will not allow for any investors to “opt out” of the scheme. _


Sir O "And we will spread the tax as far as we can. And think of all those smart people who took their gains out of the market in November...hey they can afford a tax."

_Mr Swan said today the Government would not be releasing the correspondence between Treasury Secretary Ken Henry and Reserve Bank governor Glenn Stevens on a possible cap on the bank deposit - the subject of heated exchanges in Senate estimates today. _

"I don't see why we would be publishing all of the advice or any of the advice that is coming through from individual agencies or between individual agencies," Mr Swan said.

Sir O "And when people disagree with what we are doing we'll try and smother the dissension and present a united front"

Ok Mister you wanna try and shake me down?  

Sir O flips Mr Swan the finger and opens a safety deposit box at the bank. There 999,900 in the bank. Happy now?

Sir O


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## CamKawa (22 October 2008)

Will the insurance fee be tax deductable?


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## Buddy (22 October 2008)

This reminds me of what this government (er.... bunch of thieves) did with ETS (er............carbon tax).  When you see an opportunity, TAX IT!

So does anyone (with half a brain....er...... not the government) know what this new TAX is going to be? Greater than the interest earned? May turn out that it's better to have cash under the mattress.

Pretty easy to drive a truck through the whole thing though.  As Sir O says "There 999,900 in the bank. Happy now?"

So, I wonder how long will it take before these thieves work out that they need to lower the threshhold, in order to collect more tax.


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## MrBurns (22 October 2008)

Buddy said:


> This reminds me of what this government (er.... bunch of thieves) did with ETS (er............carbon tax).  When you see an opportunity, TAX IT!
> 
> So does anyone (with half a brain....er...... not the government) know what this new TAX is going to be? Greater than the interest earned? May turn out that it's better to have cash under the mattress.
> 
> ...




So open a second account in another back to stay under the threshhold ?


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## mantronic (22 October 2008)

The after tax returns on cash are less than inflation after tax.  And now they want to add a new tax?

It should at least be optional like an insurance.


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## MrBurns (22 October 2008)

mantronic said:


> The after tax returns on cash are less than inflation after tax.  And now they want to add a new tax?
> 
> It should at least be optional like an insurance.




If it's in a super fund you only pay 15% but yes it's getting lees attractive and looking more like a place to park the money than an investment.

Thanks Rudd and Swann.


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## Buddy (22 October 2008)

MrBurns said:


> So open a second account in another back to stay under the threshhold ?




If I worked for the government, the first thing I would do is to make sure that this TAX applies to the total aggregate of accounts.  So if you have 2 accounts say, with 750k in each, sorry pal, you're over the threshhold. PAY ME THE TAX.  Just you watch. This will happen!


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## mantronic (22 October 2008)

Buddy said:


> If I worked for the government, the first thing I would do is to make sure that this TAX applies to the total aggregate of accounts.  So if you have 2 accounts say, with 750k in each, sorry pal, you're over the threshhold. PAY ME THE TAX.  Just you watch. This will happen!





Not so in the states. Multiple accounts can spin the 100k guarantee to over 1.5m.


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## c-unit (22 October 2008)

It was the right move IMO. People had started taking their money out. The confidence was quickly evaporating. What other option was there?

What should it have been capped at?


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## GreatPig (22 October 2008)

Buddy said:


> the first thing I would do is to make sure that this TAX applies to the total aggregate of accounts



Okay, so different entities. Some in hubby's name, some in the wife's, some in the kids perhaps, and some spread across any family trusts and companies.

GP


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## Buddy (23 October 2008)

GreatPig said:


> Okay, so different entities. Some in hubby's name, some in the wife's, some in the kids perhaps, and some spread across any family trusts and companies.
> 
> GP




I'm gunna have to think fast here piggy, you guys are slippery than eels.
Hmmmm...... so I will get my Bank Deposit Police on the beat and find out where you have stashed the cash. THEN I AM GOING TO TAX YOU, AND FINE YOU FOR BEING A TRICKY LITTLE BUGGER.

Seriously though, this is really just another tax on business.  
And assuming there is no disaster (wishful thinking maybe ), what are the thieves going to do with this TAX?


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## Buddy (23 October 2008)

Just heard it's 2%!!!!!!!!!!!!!!!!!!!! (I hope what I heard is a typo)
Is this guy (krudd) a total efn idiot??????
There is no need for me to put down on paper what this is going to do to interest rates, business sentiment, the economy in general. It should be obvioous to the intelligent members of this forum.
This guy has to go. A complete tosser!


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## MrBurns (23 October 2008)

Buddy said:


> Just heard it's 2%!!!!!!!!!!!!!!!!!!!! (I hope what I heard is a typo)
> Is this guy (krudd) a total efn idiot??????
> There is no need for me to put down on paper what this is going to do to interest rates, business sentiment, the economy in general. It should be obvioous to the intelligent members of this forum.
> This guy has to go. A complete tosser!




I seriously think he does not have a clue.


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## Aussiejeff (23 October 2008)

MrBurns said:


> I seriously think he does not have a clue.




Market certainly doesn't think much of "Plan C". All Ords in free fall atm....


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## MrBurns (23 October 2008)

Aussiejeff said:


> Market certainly doesn't think much of "Plan C". All Ords in free fall atm....




It's plain he's struggling, I have neve ever seen such important decisions made so quickly then they have to be changed.... it's frightening, makes you feel like there's no one at the wheel.

$20,000 to insure a deposit over $1M does he think we're all freeking crazy ?


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## CamKawa (23 October 2008)

2% hey? Will that be on the whole amount or only on the portion above 1 mill? Back to moving money out of Australia again by the sounds of things. 747 may be trying to force individuals/companies to spend to keep the bubble inflating, which is about as intelligent as trying to put out a fire with kerosene. It's ironic that he is penalising savers when it’s those that spent too much that caused this crisis.


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## GreatPig (23 October 2008)

There's an article about it here.

Sounds like it's uncertain yet, with only mention of "up to $20,000 per $1m for wholesale bank credit". Other figures mentioned are 0.1%, 0.7% and 1.5%, depending on the institution, and it seems to still be undecided as to whether or not it would be compulsory.

GP


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## MrBurns (23 October 2008)

CamKawa said:


> 2% hey? Will that be on the whole amount or only on the portion above 1 mill? Back to moving money out of Australia again by the sounds of things. 747 may be trying to force individuals/companies to spend to keep the bubble inflating, which is about as intelligent as trying to put out a fire with kerosene. It's ironic that he is penalising savers when it’s those that spent too much that caused this crisis.




This goose is unbelievable, trying to pump up the housing bubble even further ? I haven't got much faith in Turnbull either after seeing him in action, how did he get to be so rich ?


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## Buddy (23 October 2008)

MrBurns said:


> This goose is unbelievable, trying to pump up the housing bubble even further ? I haven't got much faith in Turnbull either after seeing him in action, how did he get to be so rich ?




Complete nitwit! So is it a fee or a tax?  I bet its a tax, otherwise it would be a tax deduction - cant have that can we. This is policy on the run and a total disaster. If I had a plan to de-stabilise the market then it would be fairly close to this. These people are totally out of their depth and drowning.


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## CamKawa (23 October 2008)

MrBurns said:


> This goose is unbelievable, trying to pump up the housing bubble even further ? I haven't got much faith in Turnbull either after seeing him in action, how did he get to be so rich ?



Yes I agree. He'll probably use the money he's generating with this new tax to further fund the first home buyers grant to prop-up developers and their financiers. It’s just crazy.


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## CamKawa (23 October 2008)

A bit of an update on it here.


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## Glen48 (23 October 2008)

BHP is now at $24.00 in a couple of weeks they will be $15 and then every one will panic and pull their money out regardless of what the Fed's and Banks are saying.


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## MrBurns (23 October 2008)

Glen48 said:


> BHP is now at $24.00 in a couple of weeks they will be $15 and then every one will panic and pull their money out regardless of what the Fed's and Banks are saying.





I think Rudd is creating more panic than he's curing.


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## Bushman (23 October 2008)

Glen48 said:


> BHP is now at $24.00 in a couple of weeks they will be $15 and then every one will panic and pull their money out regardless of what the Fed's and Banks are saying.




...and then we might finally have capitulation and a bottom.


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## GreatPig (23 October 2008)

Glen48 said:


> BHP is now at $24.00 in a couple of weeks they will be $15



Maybe Ducati will be right yet. 



			
				Ducati916 said:
			
		

> with “Fair Value” calculated at the range of $18.70 to $13.80 per share



From 2006.

GP


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## Buddy (23 October 2008)

CamKawa said:


> A bit of an update on it here.




Here is a quote from that article (last para). Now I know 747 is a politician so one should not expect anything intelligent to come out of his mouth. But sheeesh, give me a break. So just exacly what has the deposit tax got to do with "every mum and dad in the gallery", apart from the fact that it is going to see a mass exodus of funds from Australia, the AUD at about 23cents to the USD, an increase in business failure, unemployment, blah blah. And an increase in the cost of your plasma TVs and the rest of the harvey norman crap.


"We have taken decisive action because every mum and dad in the gallery would like to know this today, their deposits are guaranteed, and under the actions of this government that guarantee is being provided, and furthermore as a consequence of that action we have also seen through the other action taken by the government downward pressure on interest rates.''


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## CoffeeKing (24 October 2008)

Did I hear something on the news tonight that you have to have a _million_ or more, anything less won't matter? That can't be right...

I was watching ch 7

Found this and read it, insurance for over a mil

Feel sorry for the people who's fund froze payout, they depend on this to survive, and at least they are living off there own backs.

http://news.ninemsn.com.au/article.aspx?id=653042


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## trading_rookie (24 October 2008)

> So, I wonder how long will it take before these thieves work out that they need to lower the threshhold, in order to collect more tax.




As soon as they admit that Henry dismissed the RBA's advice. The RBA would like to see it capped at $200K.


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## Calliope (26 October 2008)

The National Australia Bank CEO John Stewart said the he fully supports the bank guarantee. In the words of Mandy Rice-Davies;



> Well, he would, wouldn't he?




I saw the CEO Perpetual Investment Management interviewed on The Insiders this morning. He was more concerned about the fallout.


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## Julia (26 October 2008)

Calliope said:


> I saw the CEO Perpetual Investment Management interviewed on The Insiders this morning. He was more concerned about the fallout.



As well he might be.  Puts them and similar funds in a most unenviable position.  Don't know how the government plan to solve this one.


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## Aussiejeff (27 October 2008)

Julia said:


> As well he might be.  Puts them and similar funds in a most unenviable position.  Don't know how the government plan to solve this one.




Easy-peasy. Same way as the US Fed.

Promise them "All is well". Promise "Everything is covered". Promise "More $AUBananaBuck$ for all!".

Promise, promises, promises. Guv-Mints luv 'em. It's wot makes Guv-Mints go round, you see.

If the numbers somehow "don't add up" in 6 months time and some tricky journos whisper "strewth - the country's going broke!" why, they can just expand the Mint output to cover their a$$e$!

Rece$$ion? Pah! Humbug! Our esteemed ones spit in the eye of the StagFlation Monster.

HALLELUJAH BROTHERS AND SISTERS. WE ARE ALL SAVED! 

:engel:


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## Aussiejeff (27 October 2008)

ooops....

Fergot me Cynic pill this morning. *choke*


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## numbercruncher (27 October 2008)

> $AUBananaBuck$




haha love it - Morning AJ !


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## Calliope (29 October 2008)

It would be naive to think that Mr Rudd would not have known exactly what the fallout to his unlimited bank deposit guarantee would be. He would have done his sums. He would have been encouraged by the assumption that handouts to millions of non-investors would give a hefty boost to his approval rating. 

The fact that a few hundred thousand investors in mortgage trusts and income funds might have their redemptions frozen was a risk worth taking. After all this mainly affects the elderly who have tried to make provision for their retirement by taking a little more risk than putting their money in the bank for a trifling interest.

But he may now be thinking that he was too rash. The problem is we don't know what Kev will do when caught in the headlights.


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## mayk (29 October 2008)

Calliope said:


> The problem is we don't know what Kev will do when caught in the headlights.




He can always call Howard/Castello. Wasn't there a joke before election on exactly the same scenario.


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## brianwh (29 October 2008)

I have just read through the replies in this thread in the hope that someone would have made a reasoned explanation of why this guarantee was such a bad thing in the circumstances. I too am uncomfortable with it but have yet to hear a convincing alternative proposal. Reading through this leaves the impression that a lot of people are using it simply to give vent to their political prejudices rather than offer constructive criticism and comment.

PS: I think the same criticism could be levelled at the media on this issue.


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## trading_rookie (29 October 2008)

> It would be naive to think that Mr Rudd would not have known exactly what the fallout to his unlimited bank deposit guarantee would be.




My suspicion is he was advised there would be a rush on the non APRA-regulated companies that are now falling over themselves to get bank status to have those mortgage and cash trusts' guaranteed and ultimately **government** regulation, as opposed to dodgy self regulation or worse! approval from Standard & Poor's - who has faith in what they approve these days?!?!?!

Will hopefully mean less financial cowboys playing with people's savings, even if it means we're going back to a 60's scenario of banks and more banks.


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## trading_rookie (29 October 2008)

> I have just read through the replies in this thread in the hope that someone would have made a reasoned explanation of why this guarantee was such a bad thing in the circumstances.
> 
> Reading through this leaves the impression that a lot of people are using it simply to give vent to their political prejudices rather than offer constructive criticism and comment.




Pffff...as someone who's not a big fan of Dudd, I'd say it's the best thing he's done since he became PM. If he didn't announce what he did that weekend, I believe there would have been a panic rush on the banks the following Monday...he defused the 'bomb' so to speak. Now the devil is in the detail. Let's no forget there is a time limit of only 3 yrs on deposit guarantee's. It's possible as time goes on the cap will lower as confidence in the markets is restored.


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## mayk (29 October 2008)

trading_rookie said:


> Pffff...as someone who's not a big fan of Dudd, I'd say it's the best thing he's done since he became PM. If he didn't announce what he did that weekend, I believe there would have been a panic rush on the banks the following Monday...he defused the 'bomb' so to speak. Now the devil is in the detail. Let's no forget there is a time limit of *only 3 yrs on deposit guarantee's*. It's possible as time goes on the cap will lower as confidence in the markets is restored.




It is one important point no one is drumming.


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## cornnfedd (29 October 2008)

CoffeeKing said:


> Did I hear something on the news tonight that you have to have a _million_ or more, anything less won't matter? That can't be right...
> 
> I was watching ch 7
> 
> ...




Wasnt it for under 1 million, so to get past that people could just split the funds through a few financial institutions?


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## Julia (5 December 2008)

Just a warning on the bank deposit guarantee, this does not include the interest earned, at least with the CBA and Bank of Qld.  I'm awaiting the reply to the question from ANZ.

I have term deposits with the above three organisations, one quite large where the interest paid at end of the term is a reasonable amount of money.
It would be pretty upsetting (in the admittedly unlikely event of any of the above falling over) not to get the interest.

BOQ advise that only the capital is guaranteed.

CBA advise that the interest is only guaranteed if it is added to the original deposit at the end of the term and rolled over into a new term deposit.

Expect ANZ will be similar.


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## GreatPig (5 December 2008)

Julia said:


> CBA advise that the interest is only guaranteed if it is added to the original deposit at the end of the term *and rolled over into a new term deposit*.



So if you leave it in an ordinary account instead of adding it to a new term deposit, it's not guaranteed?

I thought all money was guaranteed, once actually in a bank account.

GP


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## doctorj (5 December 2008)

Buddy said:


> Just heard it's 2%!!!!!!!!!!!!!!!!!!!! (I hope what I heard is a typo)
> Is this guy (krudd) a total efn idiot??????
> There is no need for me to put down on paper what this is going to do to interest rates, business sentiment, the economy in general. It should be obvioous to the intelligent members of this forum.
> This guy has to go. A complete tosser!



Lets wake up a little here.  Do you know how other countries fund their deposit insurance schemes?  Most are funded ex-ante by the banks themselves, based on a % fee of eligible deposits or total deposits.  Banks pay this and one way or another its passed on to customers (fees, a wide interest rate spread).
This is standard practice. How can banks exist without deposits forming part of their capital base? Deposit insurance helps protect it.

I spoke to a chap from a small Central Asian bank last night and his bank pay a % fee and the amount is capped.  These are made up numbers, but say you have $200,000 in the bank, they would pay $6,000pa in premium, but in the bank fails, the depositor only receive a max of $6,000 back from the deposit insurer.

In effect they pay up to 100% of the sum insured in premium every year on some accounts.  In comparison to the rest of the world, the Australian scheme is quite cheap.


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## Julia (5 December 2008)

GreatPig said:


> So if you leave it in an ordinary account instead of adding it to a new term deposit, it's not guaranteed?
> 
> I thought all money was guaranteed, once actually in a bank account.
> 
> GP



Doesn't sound like it GP.   Might be good for others to check with their financial institutions to find out their policy.

I will be following up the CBA reply asking the very question you've raised.
e.g the current instruction on the CBA deposit is for them to pay the interest at end of term into an ANZ a/c.   Their reply indicates that that interest would therefore not be guaranteed.


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