Chances of a run on the banks?

[megla]

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?

 

[Julia]

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.

 

[Judd]

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.

 

[YELNATS]

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.

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.

 

[trading_rookie]

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

 

[Tysonboss1]

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,

 

[tech/a]

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

 

[CamKawa]

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?

 

[Prospector]

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!

 

[GreatPig]

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

 

[GreatPig]

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

 

[reece55]

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

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

 

[Buster]

Hey P!

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

 

[tech/a]

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

Read the artical AGAIN


Thats TRILLIONS not BILLIONS
get your head around this.

Billions X 1000

 

[Aussiejeff]

Read the artical AGAIN


Thats TRILLIONS not BILLIONS
get your head around this.

Billions X 1000

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

*sigh*


AJ

 

[reece55]

Read the artical AGAIN


Thats TRILLIONS not BILLIONS
get your head around this.

Billions X 1000

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

Cheers
Reece

 

[explod]

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

*sigh*


AJ

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.

 

[megla]

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.

 

[tech/a]

I hear mattress sales are on the rise.

 

[Pager]

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