Australian Banks: A cause for concern?

Julia said:

That's as I have understood it also.

Do any of you who are espousing contrary views really believe any Australian with funds in any of the big banks are at risk of losing their money?

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My cash is with a credit union, just think there is more chance of a major bank going belly up than a solid credit union.LOL

Julia said:

That's as I have understood it also.

Do any of you who are espousing contrary views really believe any Australian with funds in any of the big banks are at risk of losing their money?

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Hi Julia and cheers to Nulla for his reply.

I'm not so worried about losing my deposits in two of the big four banks but are concerned that I might not be able to withdraw it when I choose to do so.

As for them collapsing, our govnuts will sell our nuts before that happens to keep them going.

But my opinion is worth little as I currently hold three shorts of four of the big four. Yes I see the contradiction.

Cheers

Also from memory, the CBA didn't have a glitch where people couldn't access their money, their glitch was that the ATM's were giving people access to money the people didn't have in their accounts.
Silly people thinking they were getting money for free soon learnt that the transaction records, when updated to their account, showed that they were overdrawn and then they were required to pay it back.

nulla nulla said:

Also from memory, the CBA didn't have a glitch where people couldn't access their money, their glitch was that the ATM's were giving people access to money the people didn't have in their accounts.
Silly people thinking they were getting money for free soon learnt that the transaction records, when updated to their account, showed that they were overdrawn and then they were required to pay it back.

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Yes they did I am a CBA customer there was a day when I couldn't even get money from the counter! Not just an ATM glitch!

http://www.itnews.com.au/News/230464,commbank-blames-outage-on-security-update.aspx

Julia said:

That's as I have understood it also.

Do any of you who are espousing contrary views really believe any Australian with funds in any of the big banks are at risk of losing their money?

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Oh Julia, don't get me wrong, I am sure if necessary the guarantee will come into effect and sooner or later we will all get the nominal balance back in our hands. Unfortunately I doubt the Government has any method to actually fulfill the guarantee that doesn't involve printing that money.

I remember when Westpac nearly went broke circa 1988.

sinner said:

Oh Julia, don't get me wrong, I am sure if necessary the guarantee will come into effect and sooner or later we will all get the nominal balance back in our hands. Unfortunately I doubt the Government has any method to actually fulfill the guarantee that doesn't involve printing that money.

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Correct. It is actually impossible for the government to furnish people with the balances promised to them by their banks, in the event of a run. Bank credit to customers (redeemable on demand) exists in multiple to the actual circulating plastic notes. The government would have to issue bonds like there is no tomorrow, and the RBA would then purchase these.

To be honest I doubt even the RBA could manage this feat. Our notes are not simple paper and black ink. We have special plastic notes - I wonder how fast these can actually be produced. The bizarre reality is that in the event of an Australian run, the most important economic influence would be the number of note-producing devices the RBA has.

Of course, one would be happy to get ones notes. One would then immediately walk to a bullion dealer.

Knobby22 said:

I remember when Westpac nearly went broke circa 1988.

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Yep Kerry Packer bought up a swag of shares and had discusions with them about getting a seat(s) on the board. Then sold the lot for a profit when he decided he didn't want to be a banker.

The word is they had head office staff driving car loads of money arround to the branches to meet the run of withdrawals.

tothemax6 said:

Correct. It is actually impossible for the government to furnish people with the balances promised to them by their banks, in the event of a run. Bank credit to customers (redeemable on demand) exists in multiple to the actual circulating plastic notes. The government would have to issue bonds like there is no tomorrow, and the RBA would then purchase these.

To be honest I doubt even the RBA could manage this feat. Our notes are not simple paper and black ink. We have special plastic notes - I wonder how fast these can actually be produced. The bizarre reality is that in the event of an Australian run, the most important economic influence would be the number of note-producing devices the RBA has.

Of course, one would be happy to get ones notes. One would then immediately walk to a bullion dealer.

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If our banks actually had all the cash just sitting there in case every depositor wished to withdraw their share, then you really would have something to worry about in terms of the banks' efficiencies!

NAB is just a crap bank end of story

Julia said:

If our banks actually had all the cash just sitting there in case every depositor wished to withdraw their share, then you really would have something to worry about in terms of the banks' efficiencies!

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Is this some sort of weird strawman reverse logic? I wasn't even referring to bank reserves, I was merely pointing out that the Australian Government has absolutely no chance to repay what they have insured in the event of a crisis. There is no surplus with which to repay the money of even 5% of Australian bank clients ergo money will be printed to ensure the nominal values are repaid. It is highly doubtful these new nominal dollars will hold the same purchasing power as the ones you actually lost though.

But anyway, who said the bank needs to hold every single dollar on call? Not I.

Just for the record though, the big 4 banks hold less than 1/10th of reserves as tier 1 capital.

Australian banks are just like Cadbury.

Cadbury is required by advertising law to include a minimum of 25% cocoa mass in their processed food product to market and sell this processed food product as "chocolate".

You can be sure if the law required them to include only 20% then they wouldn't include a percentile more. Whatever it takes to ensure what they are selling can still be labelled "chocolate". They certainly don't care that their competitors all offer higher cocoa mass as a percentage in competing products.

The big 4 will happily keep tier 1 capital at the absolute lowest bound allowed by the Government and not a penny more will be allocated, as those pennies are required elsewhere in the servicing of debt through more debt, fractional reserve lending, market speculation, etc.