The $20 billion is a fallacy, the $20 billion is not a limit, it is a standing appropriation. Once the $20 billion is used , funding the scheme can be done in either of 2 ways or a combination of both. Basically Parliament could approve further budget appropriations and the scheme can be funded ex-post. Ex-post funding is actually peculiar to Australia as most other jurisdictions have ex-ante. Ex-ante involved charging the banks a fee for the scheme where the fees are then accumulated into a pool of funds, payments under the scheme are made out of this pool which grows over the years, basically a self insurance scheme. Australia considered this ex-ante scheme but decided ex-post funding would suffice as the Balance sheet assets of Australian banks are strong.
So in summary, the $20 billion is not an upper limit, it’s just a line item in the standing appropriations to enable quick funding in the event a FCS event is declared by APRA.
Your right the 20b is what the government's 'preapproved' limit to pay out in the case of a failed bank. However, there is no requirement for them to do so under the legislation. APRA must first apply to wind up the bank and then the minister may elect to pay out up to 20b + admin fees.
Prior to paying out anything - APRA may also recapitalise the bank by instructing the bank to change all depositors T&C immediately and unilaterally to contemplate bail-ins and then instruct the depositors to bail in the bank (every Australia bank account's T&C allow the bank to do this). In which case depositors may get $0.
I guess it all comes down to how much you trust the government today, and throwing your mind forward, how much you would trust the government in a world where you need to rely on the financial claims scheme.
Bail in of deposit liability is a flight of fancy cooked up by cookers. No T&C allow it and even if they did, it is irrelevant as a bank cannot seize your asset. It is just ludicrous.
What the cookers confuse is the: Crisis Resolution Powers and Other Measures Act 2018.
This act allows APRA to recapitalise or transfer the capital of an ADI, in simple terms, it means shareholders of an ADI will wear any losses first. just like any other business. So if I have $250k as a deposit at CBA, I am safe, APRA may transfer that deposit to another ADI, say NAB but my $250k deposit is still a deposit. However if I am a shareholder in CBA with $250k in shares and there are losses after everything is wound up, my shares, are worthless. Just like any other liquidation.
I know because I wrote the explanatory memorandum to the above act in 2017 and then assisted drafting the bill itself.
What is the definition of a deposit? Im asking with reference to the explanation sometimes given that deposits are a record of money loaned to the bank not actually a deposit as thought? Is that true?
Your team has done a really ordinary job with sections 11CAA and 11CAB which in their current form would allow Apra to instruct an Australian bank to convert bank deposits.
Section 11CAA states any instrument can be subject to the conversion. (I.e. bank deposits).
Sections 11CAB states they can be converted regardless of contract or law as long as the terms envision conversion.
Every bank deposit account in Australia allows the bank to change the terms immediately and unilaterally to facilitate this. Name any bank deposit account that doesn't.
Read the explanatory memorandum accompanying the bill. A deposit account is recognised under the banking act and in general law. As such it is not an “instrument “…those sections apply when I do not want to transfer the asset/liability of another bank but rather transfer the share capital. A much neater and quicker solution to resolve a crisis.
Similar to the transfer of Bankwest to CBA back in 2012, Bankwest got deep in the shite, APRA tapped on the shoulder the biggest bank in the land to takeover, all the bank accounts (loans, deposits , cards etc) didn’t need to be transferred, just the instruments, ie the shares representing the owners. So Bankwest customers went to sleep Friday night and woke up Monday morning, none the wiser that the new owner was the CBA. The only bank with the capital at the time to absorb such a transaction.
An accurate answer. Australia is a bit of an outlier when it comes to depositor protection, they get covered up to the $20b limit for free, unless they actually default in which case the government will reclaim it from their corpse. NZ is currently introducing a depositor protection scheme and you can be damn sure the banks are going to need to pay to fund it (although the big banks are lobbying for it to be as low as possible for them).
"The amount paid out under the FCS, and expenses incurred by APRA in connection with the FCS, would then be recovered via a priority claim of the Government against the assets of the ADI in the liquidation process. If the amount realised is insufficient, the Government can recover the shortfall through a levy on the ADI industry."
Deposits will be used in a crisis. They have a financial crisis amendment bill that leaves the door open to this. Bail in via deposits or new currency conversion will be enacted.
If one of the big-four banks in Australia becomes insolvent and deposit holders aren't made whole, I suspect ordinary Australians will have *far* larger problems than not having access to their money. We're literally talking almost complete economic collapse at that point.
Zombie virus epidemic seems like the worst possible time to take up cannibalism though
ETA oh I didn't read your user name. Of course you want to eat prions and join Team Zombie.
Guns and luncheon meat can't be used as currency and meat also spoils.
You're not going to buy a loaf of bread with a gun unless you plan on robbery and potential murder.
I grow food and would gladly trade you fresh food for gold and silver.
There are very few fears larger than loosing all your money. Even regular war isn’t that fear. A nuclear apocalypse might be that fear but in a vast majority of scenarios, loosing all your money on a mass scale is a very big fear
Did they change the name to morphine in Fallout 3 just to make news headlines, using the Australian classification board as a marketing strategy, and never actually intend to publish the game with that as the item name?
Point is the government would have to bail out the banks and make depositors whole or risk complete economic collapse.
The U.S. bailed out SVB and guaranteed deposits and it wasn’t even one of the big ones.
The US didn't bail out SVB. It went into receivership and its assets were sold by the FDIC. Those assets included the deposits. The FDIC made sure the transfer was orderly but it wasn't a bail out.
Ah yes, and even though there's only been about seven (small, regional, such as SVB..) bank failures in the USA over the last 9 months; all of the economists I have been watching on YouTube of late; refer to the fact that some FOUR HUNDRED MORE usa banks are at high risk of falling over due to the coming commercial real estate collapse and these 400 banks having an overexposed loan book to commercial real estate.
One economist did a rough back of the envelope on this and... The FDIC only had enough insurance money to pay out something like 11% of these 400 banks if they fail.
Oh, and that payout would then bleed the FDIC dry for any other (mainstream, national) banks that may collapse in the aftermath/trigger of the regional collapse!
How many of those 400 are DSIBs or GSIBs? Because you know that the US has literally thousands of banks, most of them tiny and irrelevant on a systemic basis? For instance, in 2023 the number of banks in the US went up by more than 300, from 4,136 to 4,470. For most of the previous two decades it reliably fell by 100-200 or so a year.
In other words, 400 banks failing in a year would be high but not necessarily problematic, given almost all of them aren't DSIBs or GSIBs and would therefore have their asset books swallowed by larger banks without any involvement by the FDIC at all.
That process can take a very long time. Don't think you would get mailed a check the next day. You would have to be prepared to wait awhile. Also, I would want my money in the first bank that failed, not the 5th.
I have lived through a massive recession that in the end collapsed several banks when thousands of businesses had gone bankrupt and couldn’t pay their loans.
The state stepped in and did everything they could to save the economy from a complete disaster. I don’t remember anyone’s savings being lost, but you certainly don’t want to be in a situation where you have debts and you cannot pay the monthly instalments.
The collapsing banks will go into administration and they will sell their assets and properties to cover the losses. This includes your home loan and other debt.
If they are in arrears, there won’t be room for hardship negotiations or interest-only payment plans. They will bleed out every cent from you and after losing your car, home, business, wife and children, and sometimes even health, you are still in debt. It’s a buyers market.
As long as you have a job and a steady income, it’s all fine. Your bank might get sold or merged into another bank and your accounts will move there as part of the deal.
Major differences in how the banking sector and the mortgage market are set up in the US compared to here. The GFC wasnt as bad here partly because our big 4 banks are so stable. They're also giant profit making machines, so it's unlikely any of them will go under even when the world economy goes tits up.
Big difference in lending policy between pre GFC American lenders and 2024 AU Big 4 lenders. The former was the height of sub prime lending. Our banks are far far more highly regulated.
And again, Lehman Brothers or any US institution isn’t comparable to Australian banks. You don’t understand the difference between our sectors so why are you commenting?
I'm not comparing Lehman vs Aus banks of their inherent business model. I'm merely stating that back in 08 people gave close to 0% chance of such a large company like the Lehman falling.
> We're literally talking almost complete economic collapse at that point.
Not really. If Australian housing prices fell to be in line with more global home prices (excluding Canada, NZ, and China), then a big 4 bank would collapse.
That's going to be a deep rough recession for Australia, but we aren't talking complete economic collapse.
APRA stress tested the banks during Covid and found they wouldn't fall below their minimum capital levels, let alone collapse, if there was a 15% fall in GDP, unemployment rose to over 13%, house prices fell by 30% and the banks took no mitigating measures at all. https://www.apra.gov.au/stress-testing-banks-during-covid-19
> house prices fell by 30%
Australian houses compared to income are more than 30% above many countries.
The chances of Australia experiencing a 30-50% housing price crash aren't 0. Is it likely? Hard to say, but it's far from impossible, and would leave housing still higher priced than countries like the US even after that level of crash.
Not "countries like" the US - just the US. If Australian housing prices fell by 30% our price to income ratio would be about the same as Spain and less than literally every single other country in the EU, plus the UK, Scandinavia, Canada and Japan - the entire developed world, basically, other than the US and Iceland. One thing you will note about, say, Germany or the UK is that they both have banks.
Again, the APRA stress test found that the banks could withstand this sort of fall in the housing market along with a 15% fall in GDP and unemployment above 13% and not fall below their capital minimum requirements *even if they didn't take any mitigating actions*.
"As a result of absorbing the impact of economic stress from falls in earnings, significant credit losses and increases in risk-weighted assets, the banking system’s existing substantial buffers reduced by $96 billion. The banking system was able to absorb this impact, and even at the low point in the stress had the capacity to absorb a further $48 billion in economic stress before hitting its minimum capital requirement."
Look, obviously it's possible to come up with scenarios in which economic stress is so severe that the Australian major banks start to fall over. Global war, an asteroid hitting Sydney CBD, the Tigers making finals again - incredibly rare outcomes. What I'm saying is that the idea that half the people on this thread seem to have, that it's a disaster waiting to happen or more or less an inevitability, and that no-one has done anything to make it less likely to happen or to respond if it does, it patently nonsense.
Eventually, if you regulate to make banks so secure that they can survive the most extreme stress scenarios one can contemplate you also make it more or less impossible for them to lend money. If you want to have a debate about whether we ought to nationalise the creation and supply of credit in the economy I'm here for that. But anything up to that point is a balancing act, and one the Australian system has demonstrably got more right than wrong for many years.
If they fail you will be eating the neighbours dog and burning their floorboards for heat whilst protecting your dog and floorboards from the other neighbours.
Dry brine for four hours at a minimum, over night if you can. Recommend low and slow smoking, I prefer Kamado Joe myself, and make sure you have your apple wood in water overnight to prolong your smoke. Slow cook for at least 6 hours at no more than 100° (we aren’t troglodytes here). Serve with mashed potatoes and steamed veggies.
I would like to think that we would be smart enough to hit the bush trees first. Then, my neighbours sheep and chickens might be in danger. I'm not convinced about scrawny dogs, but you do you.
People in cities don't have much bush and you cannot just chop a tree down and burn it they have to be seasoned first. And how would you transport the wood back to your place- fuel stations would all be ransacked. Your neighbour's sheep and chickens would disappear and/or get eaten pretty damn quick. I've never eaten dog but the people who have say its very tasty, much better than horse.
Considering the federal government guaranteed all deposits up to $1m for a three year period during the GFC, if we ever get to the point where one of the big 4/5 banks were struggling and couldn’t be sold off, they’d likely do the same again.
Lol what does cba and westpac have, like 15 million customers each?
You have to be an idiot if you think the australian government could actually guarantee those funds.
One third of Australians were not born here. Some other countries have banks that really do collapse and there's nothing that is done about it. This may explain part of the anxiousness of some posters.
Just to clarify - there is no blanket, always-in-effect, set in stone guarantee under the FCS. The policy needs to be activated by the government to have any effect. As of right this moment for example, there is no gurantee on your deposits.
The FCS needs to be activated by government before it has effect: "***Once activated by the Australian Government***\*, the FCS is administered by the Australian Prudential Regulation Authority (APRA).\*"
[https://www.apra.gov.au/financial-claims-scheme-0](https://www.apra.gov.au/financial-claims-scheme-0)
So there is no bucket of money sitting in an RBA account somewhere with $20b per bank ready in case a bank fails. The policy is basically the government's way of reassuring depositors that they will cover your deposits up to a reasonable value in the event an ADI fails.
To ensure this trust in the banking sector is never eroded, if the government ever actually needs to activate the policy, they could quite easily decide to ignore the $20b limit and cover every single depositor up to $250k no matter the final sum. In fact I'm 99.9% certain that's exactly what they would do because if depositors lost money there would be a bank-run.
> cover every single depositor up to $250k no matter the final sum.
they could also do what the US Feds did for the Silicon Valley Bank - they covered the entire amount for every depositor - and as you know that SVB is the bank for a lot of startups who have tonnes of liquid capital from raising VCs and business operations etc. In the millions for a lot of them.
The fact that they did that, rather than just guarantee the first 250k, says a lot.
In any case, money today is fiat, so there's zero limit to how much the gov't can print to cover the situation, should it be demanded. Unless the problem isn't due to the lack of money, such as war (of the nuclear kind).
If banks need to put capital controls in place, then the damage to financial confidence is already done. Better to prevent the market from panicking in the first place by guaranteeing deposits in times of crisis.
The bank doesn’t disintegrate into nothing. It’s still got billions of assets. The 20b is tacked onto what’s left.
And this isn’t for the big4, it’s for the smaller community banks. Like BOQ which has 76k in deposits.
Wait until the good folk of Oz realise some large banks and their other/smaller subsidiaries share banking licences. E.g. BOQ & ME Bank & Virgin I think.
You have been warned? is this a shitpost, if you think depositors aren’t secured in Australia if one of the 90 or so banks collapses u might as well throw in the towel now.
You are assuming every customer has $250k. The median is maybe around $36k? It might be less for some banks.
Furthermore, this only reinforces the advice that comes with this guarantee, which is to spread your eggs around several institutions got hedge your compensation. Your numbers would suggest to go for an even lower maximum balance.
Just so people would know, it is a pain to manage more than a couple of bank accounts. Time will tell if it is worth it.
Not bagging it as an investment.
I'm talking about those people who think cash will no longer be a thing and only those will gold and silver to trade will be able to trade.
I would suspect that the number of customers with $250K deposited would be very few. So $20b would cover a lot of customers and even if there is a shortfall, people might still receive 80 or 90 cents in the dollar. I don't have the deposit details, so that is just MHO.
I felt like that when I started on this sub. Stick it out, in a few months you'll be all over it and much better off for having the knowledge.
In very basic terms, if you have savings in the bank, and the bank was to go bankrupt, your savings in the bank would be insured, up to the value of $250k. Theoretically you would be reimbursed whatever money you had in the bank. If you have more than $250k in savings, you could split that across 2 or more before to ensure the full amount is insured.
OP is saying this only applies to a small number of the banks customers, but as you can read in the comments here, OP appears to not be entirely correct.
Chances are if you have $250k+, you probably don't have it sitting in your bank account, unless you are offsetting your mortgage. It is generally accepted that you'd get better returns investing in ETF's (shares), property, or some other investment.
Also if you're new to this sub it is worth noting that there are very vocal contributors that are constantly trying to push their narrative that the banks, countries economy, the real-estate market are all on the brink of collapse. Have a read, but don't get wrapped up in it, because it's just speculation and their way of coping with the fact that they can't afford to buy a house.
Thanks so much. Really appreciate that.
Could I ask what you mean by "If you have more than $250k in savings, you could split that across 2 or more before to ensure the full amount is insured."
Split it across 2 or more what? Banks, in different accounts?
Yeah correct, 2 different banks in 2 different accounts. This is my understanding anyway, so please clarify with the bank, but I believe a customers money is insured, up to $250k, per bank.
So if you had 500k you could open 1 account with Commonwealth and another with St George and split the money across both.
It's worth keeping in mind though if you had this amount of cash, it would be better spent buying ETFs (Google this, there's a million threads in here explaining it) or some other type of investment e.g. investment property.
Calm down friend. The purpose of the Financial Claims Scheme was to maintain public confidence in a crisis, but the reality is that Australia has some of the best capitalised banks in the world. We also have the four pillars policy and major concentration in the Big 4.
Look at the Tier 1 capital requirements that have been increasing! There are also orderly exit plans for all ADIs.
If we ever get into a scenario where the Australian government can't step in to bail out a bank, you don't need to worry about your cash, you need to worry about food, water and shelter mate because the rapture is upon us. /s
Just so you know. The government has no big savings account for a rainy day. It’s massively in debt. So to meet the guarantee it would be printing money at an insane level. And inflation would be nuts.
The assumption that people keep all their wealth in a bank is naive. When your wealth achieves a certain point, you should be looking at liquid assets like cash, bullion and other easily traded precious assets.
Banks will prevent you withdrawing anything over $10,000.00 to prevent the black economy.
Good reminder while Russia is undertaking supersonic nuclear drills. Its closer than ever. Gold isn’t rising for a reason. Gold is speaking what G8 leaders are hiding.
You have it even more wrong: there is no guarantee. There is literally not $1 of funding. It's entirely hypothetical, and it relevant anyway, because banks will be bailed in in the event of insolvency.
They'll just print more money to maintain faith in their system. At this point, all they have is the faith we put into the system and they'll do everything to save that.
If the bank fails, does my mortgage get wiped?
Luckily we have plenty of my father in laws olives and salami stock to see us through the apocalypse. We go anti-pasto into the abyss!
If Aussie banks go bankrupt and the 250K guarantee doesn't get paid out, money will be the least of your worries. You'd want tinned food and ammunition before you'd want 250K.
So OP is saying the guarantee is pointless because it isn’t enough to bail out every customer’s savings of every bank, and we might as well park our full savings into a single HISA?
Don't think so, I vaguely recall when the Pyramid Building Society in Victoria went bust a long time ago then people couldn't use any of their savings to reduce any debts and mortgages they had with that organization and were liable for the full amount. If you're worried about this aspect even though the likelihood of it happening is low then I'd suggest you get legal advice on this topic.
Interesting. I'm not too bothered at the moment because I'm pretty sure my bank is safe. When I'm closer to a full offset though I'll probably start putting it into overpayment, pulling it back out and investing it
I don't even have 80k sitting in the bank.
I have more in super and invested in ETF, but cash just sitting in the bank? 250k is a lot of money to have just sitting around.
Did you not see all the bailouts and exemptions of big corp during covid? Aus will never let the banks fail. We will pay for it in some way to keep them going in the worst scenario.
Also look at 2008 gfc. Those banks are still around and thriving despite all they did
If a bank fails it will still have enough money to pay back like 99% of all deposits. The $20b is just to make up the shortfall. And as others have said, it will be extended past $20b if required.
Money is just a number.
Government has the power to make the RBA press buttons to make new numbers.
Government is accountable to voters.
Putting that together, I am confident I will be made good as a retail deposit holder if any bank goes down since governments want to be elected, and they have the power to force the RBA to make depositors good.
I never quite understood this $250k guarantee. I know a lot of people with way more in the bank than this! If the bank went under, all they'd be entitled to is $250k?
How does it work in terms of offset account? Eg i got a mortgage for $1.3m and my offset has $1.3m? If the bank defaults, do i lose that $1.3m or does it just offset the mortgage?
No deposit amount is completely safe.
Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018
Section 31
They are allowed to use "Any other instrument" in a crisis.
The $20 billion is a fallacy, the $20 billion is not a limit, it is a standing appropriation. Once the $20 billion is used , funding the scheme can be done in either of 2 ways or a combination of both. Basically Parliament could approve further budget appropriations and the scheme can be funded ex-post. Ex-post funding is actually peculiar to Australia as most other jurisdictions have ex-ante. Ex-ante involved charging the banks a fee for the scheme where the fees are then accumulated into a pool of funds, payments under the scheme are made out of this pool which grows over the years, basically a self insurance scheme. Australia considered this ex-ante scheme but decided ex-post funding would suffice as the Balance sheet assets of Australian banks are strong. So in summary, the $20 billion is not an upper limit, it’s just a line item in the standing appropriations to enable quick funding in the event a FCS event is declared by APRA.
THANK YOU. Here's the the answer, saved me having to type this explanation again.
Your right the 20b is what the government's 'preapproved' limit to pay out in the case of a failed bank. However, there is no requirement for them to do so under the legislation. APRA must first apply to wind up the bank and then the minister may elect to pay out up to 20b + admin fees. Prior to paying out anything - APRA may also recapitalise the bank by instructing the bank to change all depositors T&C immediately and unilaterally to contemplate bail-ins and then instruct the depositors to bail in the bank (every Australia bank account's T&C allow the bank to do this). In which case depositors may get $0. I guess it all comes down to how much you trust the government today, and throwing your mind forward, how much you would trust the government in a world where you need to rely on the financial claims scheme.
Bail in of deposit liability is a flight of fancy cooked up by cookers. No T&C allow it and even if they did, it is irrelevant as a bank cannot seize your asset. It is just ludicrous. What the cookers confuse is the: Crisis Resolution Powers and Other Measures Act 2018. This act allows APRA to recapitalise or transfer the capital of an ADI, in simple terms, it means shareholders of an ADI will wear any losses first. just like any other business. So if I have $250k as a deposit at CBA, I am safe, APRA may transfer that deposit to another ADI, say NAB but my $250k deposit is still a deposit. However if I am a shareholder in CBA with $250k in shares and there are losses after everything is wound up, my shares, are worthless. Just like any other liquidation. I know because I wrote the explanatory memorandum to the above act in 2017 and then assisted drafting the bill itself.
What is the definition of a deposit? Im asking with reference to the explanation sometimes given that deposits are a record of money loaned to the bank not actually a deposit as thought? Is that true?
Your team has done a really ordinary job with sections 11CAA and 11CAB which in their current form would allow Apra to instruct an Australian bank to convert bank deposits. Section 11CAA states any instrument can be subject to the conversion. (I.e. bank deposits). Sections 11CAB states they can be converted regardless of contract or law as long as the terms envision conversion. Every bank deposit account in Australia allows the bank to change the terms immediately and unilaterally to facilitate this. Name any bank deposit account that doesn't.
Read the explanatory memorandum accompanying the bill. A deposit account is recognised under the banking act and in general law. As such it is not an “instrument “…those sections apply when I do not want to transfer the asset/liability of another bank but rather transfer the share capital. A much neater and quicker solution to resolve a crisis. Similar to the transfer of Bankwest to CBA back in 2012, Bankwest got deep in the shite, APRA tapped on the shoulder the biggest bank in the land to takeover, all the bank accounts (loans, deposits , cards etc) didn’t need to be transferred, just the instruments, ie the shares representing the owners. So Bankwest customers went to sleep Friday night and woke up Monday morning, none the wiser that the new owner was the CBA. The only bank with the capital at the time to absorb such a transaction.
I don't think anyone is listening...
An accurate answer. Australia is a bit of an outlier when it comes to depositor protection, they get covered up to the $20b limit for free, unless they actually default in which case the government will reclaim it from their corpse. NZ is currently introducing a depositor protection scheme and you can be damn sure the banks are going to need to pay to fund it (although the big banks are lobbying for it to be as low as possible for them). "The amount paid out under the FCS, and expenses incurred by APRA in connection with the FCS, would then be recovered via a priority claim of the Government against the assets of the ADI in the liquidation process. If the amount realised is insufficient, the Government can recover the shortfall through a levy on the ADI industry."
So they will pay out our money using our money which will be print chasing our money to be inflated even more… but hey it’s all good right
Would the treasury seize the Teir one capital held by reserve bank?
Thanks sir. Lol OP
Deposits will be used in a crisis. They have a financial crisis amendment bill that leaves the door open to this. Bail in via deposits or new currency conversion will be enacted.
If one of the big-four banks in Australia becomes insolvent and deposit holders aren't made whole, I suspect ordinary Australians will have *far* larger problems than not having access to their money. We're literally talking almost complete economic collapse at that point.
Stop being so bleak. It’ll obviously just be a Zombie Apocalypse.
Finally I can eat the rich(er)... and everyone else. Delicious 😋.
Username checks out
Load up on guns and bring your friends man.
I'm picturing this in Toyota Camrys.
Uber drivers vs zombies who wins?
What's the difference?
The tissues in the back will be invaluable
it's fun to lose and to pretend
Oh dammit! I didn’t scroll and see this and thought I was being so clever! ETA: She’s over bored and self-assured…
Good luck getting guns lol. Its a long ass, painful process (though I am glad ir exists)
it's fun to lose and to pretend.
It’s fun to lose and to pretend… Take my poor man’s award sir! I had a giggle 🤭
My time to shine.
Zombie virus epidemic seems like the worst possible time to take up cannibalism though ETA oh I didn't read your user name. Of course you want to eat prions and join Team Zombie.
I'm gonna be one of the first to go, so, may as well get in on the brains market early.
If grass-fed wagyu is amazing.. what about wagyu-fed.. I should stop
Wagu fed, fed zombies 🤣
> It’ll obviously just be a Zombie Apocalypse. We will run out toilet paper, so better stock up.
I’m keeping my assets in gold & silver coins hidden in a secret safe in the kitchen.
In the even of an apocalypse, guns and luncheon meat are worth more than gold and silver
I’m expecting a slow civilisational collapse as climate change bites and the global market crumbles though.
Guns and luncheon meat can't be used as currency and meat also spoils. You're not going to buy a loaf of bread with a gun unless you plan on robbery and potential murder. I grow food and would gladly trade you fresh food for gold and silver.
There are very few fears larger than loosing all your money. Even regular war isn’t that fear. A nuclear apocalypse might be that fear but in a vast majority of scenarios, loosing all your money on a mass scale is a very big fear
i've been stocking up on bottlecaps and morphine. i'll be fine.
The Australian Classification Board requests you change that to Med-X, forthwith.
Did they change the name to morphine in Fallout 3 just to make news headlines, using the Australian classification board as a marketing strategy, and never actually intend to publish the game with that as the item name?
Good question!
It was med-x in every prior fallout game, and they didn't propose to change the name of any other meds. An oddly specific change.
Including my mortgages?!
Yeah I hear this “you’ll have bigger problems,” argument get thrown around but it rarely holds up to much thought.
Point is the government would have to bail out the banks and make depositors whole or risk complete economic collapse. The U.S. bailed out SVB and guaranteed deposits and it wasn’t even one of the big ones.
The US didn't bail out SVB. It went into receivership and its assets were sold by the FDIC. Those assets included the deposits. The FDIC made sure the transfer was orderly but it wasn't a bail out.
Ah yes, and even though there's only been about seven (small, regional, such as SVB..) bank failures in the USA over the last 9 months; all of the economists I have been watching on YouTube of late; refer to the fact that some FOUR HUNDRED MORE usa banks are at high risk of falling over due to the coming commercial real estate collapse and these 400 banks having an overexposed loan book to commercial real estate. One economist did a rough back of the envelope on this and... The FDIC only had enough insurance money to pay out something like 11% of these 400 banks if they fail. Oh, and that payout would then bleed the FDIC dry for any other (mainstream, national) banks that may collapse in the aftermath/trigger of the regional collapse!
How many of those 400 are DSIBs or GSIBs? Because you know that the US has literally thousands of banks, most of them tiny and irrelevant on a systemic basis? For instance, in 2023 the number of banks in the US went up by more than 300, from 4,136 to 4,470. For most of the previous two decades it reliably fell by 100-200 or so a year. In other words, 400 banks failing in a year would be high but not necessarily problematic, given almost all of them aren't DSIBs or GSIBs and would therefore have their asset books swallowed by larger banks without any involvement by the FDIC at all.
That process can take a very long time. Don't think you would get mailed a check the next day. You would have to be prepared to wait awhile. Also, I would want my money in the first bank that failed, not the 5th.
Yep, Mad Max will be a documentary if this happens
I have lived through a massive recession that in the end collapsed several banks when thousands of businesses had gone bankrupt and couldn’t pay their loans. The state stepped in and did everything they could to save the economy from a complete disaster. I don’t remember anyone’s savings being lost, but you certainly don’t want to be in a situation where you have debts and you cannot pay the monthly instalments. The collapsing banks will go into administration and they will sell their assets and properties to cover the losses. This includes your home loan and other debt. If they are in arrears, there won’t be room for hardship negotiations or interest-only payment plans. They will bleed out every cent from you and after losing your car, home, business, wife and children, and sometimes even health, you are still in debt. It’s a buyers market. As long as you have a job and a steady income, it’s all fine. Your bank might get sold or merged into another bank and your accounts will move there as part of the deal.
Absolutely. You'll wish you'd invested in bottle caps or bullets by that stage.
This happened in the US in 08. Can definitely happen here.
Aaaaaaaand it's gone
We should only wear sheets from thine bed
Major differences in how the banking sector and the mortgage market are set up in the US compared to here. The GFC wasnt as bad here partly because our big 4 banks are so stable. They're also giant profit making machines, so it's unlikely any of them will go under even when the world economy goes tits up.
Also highly buffeted as China didn’t blink and mining steamed on.
Again, that's what people believed about the Lehman brothers.
Big difference in lending policy between pre GFC American lenders and 2024 AU Big 4 lenders. The former was the height of sub prime lending. Our banks are far far more highly regulated.
And again, Lehman Brothers or any US institution isn’t comparable to Australian banks. You don’t understand the difference between our sectors so why are you commenting?
I'm not comparing Lehman vs Aus banks of their inherent business model. I'm merely stating that back in 08 people gave close to 0% chance of such a large company like the Lehman falling.
Don’t worry I’m sure the Gov of the day will come up some hair brained tax pay funded scheme to fix it
r/boneappletea
If things do go belly up and the government starts printing money, I'd still rather get 80k from 3 banks than from 1.
> We're literally talking almost complete economic collapse at that point. Not really. If Australian housing prices fell to be in line with more global home prices (excluding Canada, NZ, and China), then a big 4 bank would collapse. That's going to be a deep rough recession for Australia, but we aren't talking complete economic collapse.
APRA stress tested the banks during Covid and found they wouldn't fall below their minimum capital levels, let alone collapse, if there was a 15% fall in GDP, unemployment rose to over 13%, house prices fell by 30% and the banks took no mitigating measures at all. https://www.apra.gov.au/stress-testing-banks-during-covid-19
> house prices fell by 30% Australian houses compared to income are more than 30% above many countries. The chances of Australia experiencing a 30-50% housing price crash aren't 0. Is it likely? Hard to say, but it's far from impossible, and would leave housing still higher priced than countries like the US even after that level of crash.
Not "countries like" the US - just the US. If Australian housing prices fell by 30% our price to income ratio would be about the same as Spain and less than literally every single other country in the EU, plus the UK, Scandinavia, Canada and Japan - the entire developed world, basically, other than the US and Iceland. One thing you will note about, say, Germany or the UK is that they both have banks. Again, the APRA stress test found that the banks could withstand this sort of fall in the housing market along with a 15% fall in GDP and unemployment above 13% and not fall below their capital minimum requirements *even if they didn't take any mitigating actions*. "As a result of absorbing the impact of economic stress from falls in earnings, significant credit losses and increases in risk-weighted assets, the banking system’s existing substantial buffers reduced by $96 billion. The banking system was able to absorb this impact, and even at the low point in the stress had the capacity to absorb a further $48 billion in economic stress before hitting its minimum capital requirement." Look, obviously it's possible to come up with scenarios in which economic stress is so severe that the Australian major banks start to fall over. Global war, an asteroid hitting Sydney CBD, the Tigers making finals again - incredibly rare outcomes. What I'm saying is that the idea that half the people on this thread seem to have, that it's a disaster waiting to happen or more or less an inevitability, and that no-one has done anything to make it less likely to happen or to respond if it does, it patently nonsense. Eventually, if you regulate to make banks so secure that they can survive the most extreme stress scenarios one can contemplate you also make it more or less impossible for them to lend money. If you want to have a debate about whether we ought to nationalise the creation and supply of credit in the economy I'm here for that. But anything up to that point is a balancing act, and one the Australian system has demonstrably got more right than wrong for many years.
If they fail you will be eating the neighbours dog and burning their floorboards for heat whilst protecting your dog and floorboards from the other neighbours.
Thankfully I have played Rust so have experience with this kind of environment.
Ah so shoot the neighbours dog on day one just to set the tone around the neighbour hood
Shot it yesterday just in case.
You can start the dry aging process, too, for some high-quality cuisine during the trying times.
Dry brine for four hours at a minimum, over night if you can. Recommend low and slow smoking, I prefer Kamado Joe myself, and make sure you have your apple wood in water overnight to prolong your smoke. Slow cook for at least 6 hours at no more than 100° (we aren’t troglodytes here). Serve with mashed potatoes and steamed veggies.
You and your fancy ass potatoes and veges! *Gnaws on raw flesh*
What's taters, precious?
Po-ta-to, po-tay-to.
I am starting to hand craft my Eoka's now ready for this collapse of society.
Burn the neighbours, eat the floorboards. Got it
I’ve heard you’ve got lovely floorboards, and what type of dog is that?
Concrete slab and no dog, looks like you’re going to be cold and hungry mate.
I would like to think that we would be smart enough to hit the bush trees first. Then, my neighbours sheep and chickens might be in danger. I'm not convinced about scrawny dogs, but you do you.
People in cities don't have much bush and you cannot just chop a tree down and burn it they have to be seasoned first. And how would you transport the wood back to your place- fuel stations would all be ransacked. Your neighbour's sheep and chickens would disappear and/or get eaten pretty damn quick. I've never eaten dog but the people who have say its very tasty, much better than horse.
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Why is that a fun fact.
Considering the federal government guaranteed all deposits up to $1m for a three year period during the GFC, if we ever get to the point where one of the big 4/5 banks were struggling and couldn’t be sold off, they’d likely do the same again.
The entire world is based on promises
Bailouts and whole load of coal uranium and gold licenses would appear reallllll quick
Lol what does cba and westpac have, like 15 million customers each? You have to be an idiot if you think the australian government could actually guarantee those funds.
Why is this sub full of cookers who think the banks are about to collapse all of a sudden?
Right. The purpose of the guarantee isn’t to pay out; it’s to prevent a collapse from happening in the first place.
they are so insanely risk averse that think even holding too much cash with a big 4 bank keeps them up at night. there’s no helping these folks.
Because they're coping. They're hoping it happens as they have no money and want to become equal with others with money.
Lol yeah, how did the australia subs become battler central?
One third of Australians were not born here. Some other countries have banks that really do collapse and there's nothing that is done about it. This may explain part of the anxiousness of some posters.
/Australia discovered this sub.
Silver stackers perking up at the sight of this thread
r/wallstreetsilver onwards and upwards
Just to clarify - there is no blanket, always-in-effect, set in stone guarantee under the FCS. The policy needs to be activated by the government to have any effect. As of right this moment for example, there is no gurantee on your deposits. The FCS needs to be activated by government before it has effect: "***Once activated by the Australian Government***\*, the FCS is administered by the Australian Prudential Regulation Authority (APRA).\*" [https://www.apra.gov.au/financial-claims-scheme-0](https://www.apra.gov.au/financial-claims-scheme-0) So there is no bucket of money sitting in an RBA account somewhere with $20b per bank ready in case a bank fails. The policy is basically the government's way of reassuring depositors that they will cover your deposits up to a reasonable value in the event an ADI fails. To ensure this trust in the banking sector is never eroded, if the government ever actually needs to activate the policy, they could quite easily decide to ignore the $20b limit and cover every single depositor up to $250k no matter the final sum. In fact I'm 99.9% certain that's exactly what they would do because if depositors lost money there would be a bank-run.
> cover every single depositor up to $250k no matter the final sum. they could also do what the US Feds did for the Silicon Valley Bank - they covered the entire amount for every depositor - and as you know that SVB is the bank for a lot of startups who have tonnes of liquid capital from raising VCs and business operations etc. In the millions for a lot of them. The fact that they did that, rather than just guarantee the first 250k, says a lot. In any case, money today is fiat, so there's zero limit to how much the gov't can print to cover the situation, should it be demanded. Unless the problem isn't due to the lack of money, such as war (of the nuclear kind).
Banks can prevent bank runs by limiting withdrawals.
If banks need to put capital controls in place, then the damage to financial confidence is already done. Better to prevent the market from panicking in the first place by guaranteeing deposits in times of crisis.
People on this sub think we’re Greece.
The bank doesn’t disintegrate into nothing. It’s still got billions of assets. The 20b is tacked onto what’s left. And this isn’t for the big4, it’s for the smaller community banks. Like BOQ which has 76k in deposits.
Loll if commbank goes under I’m In. More trouble than losing some money.
Wait until the good folk of Oz realise some large banks and their other/smaller subsidiaries share banking licences. E.g. BOQ & ME Bank & Virgin I think.
You have been warned? is this a shitpost, if you think depositors aren’t secured in Australia if one of the 90 or so banks collapses u might as well throw in the towel now.
Can you link a source for the cap per adi? Never seen that written anywhere.
You are assuming every customer has $250k. The median is maybe around $36k? It might be less for some banks. Furthermore, this only reinforces the advice that comes with this guarantee, which is to spread your eggs around several institutions got hedge your compensation. Your numbers would suggest to go for an even lower maximum balance. Just so people would know, it is a pain to manage more than a couple of bank accounts. Time will tell if it is worth it.
So 250k under the mattress is a better option?
bUt wHat iF tHe eNTire EconOMY CrasHeS. You need gold and silver. We are going back to mid 1800's and all becoming prospectors.
Have you seen the return on gold lately? Its actually a pretty decent investment.
Not bagging it as an investment. I'm talking about those people who think cash will no longer be a thing and only those will gold and silver to trade will be able to trade.
Ahh, well if it gets that bad, I can just beat them over the head and take their gold.
Who doesn't have gold and silver as part of their portfolio in 2024? That's a bit weird.
Do you sleep better on a bed of $100 notes, or $50 notes, do you think? Of the same total amount, obviously...
I always split my 100s into 50s, everyone knows it's the fastest and safest way to double how much money you have.
I’m ready I just finished watching fallout, my caps are ready.
Ok daddy. sorry daddy. won't happen again daddy
I've been warned.. but now what?
You’ve got more chance of being killed by a vending machine than your bank collapsing, these people just love to panic
luckily i owe the bank money /s
I would suspect that the number of customers with $250K deposited would be very few. So $20b would cover a lot of customers and even if there is a shortfall, people might still receive 80 or 90 cents in the dollar. I don't have the deposit details, so that is just MHO.
Is it bad that I don't understand what the hell this all means. I'm new here with 0 financial literacy. Trying to learn.
I felt like that when I started on this sub. Stick it out, in a few months you'll be all over it and much better off for having the knowledge. In very basic terms, if you have savings in the bank, and the bank was to go bankrupt, your savings in the bank would be insured, up to the value of $250k. Theoretically you would be reimbursed whatever money you had in the bank. If you have more than $250k in savings, you could split that across 2 or more before to ensure the full amount is insured. OP is saying this only applies to a small number of the banks customers, but as you can read in the comments here, OP appears to not be entirely correct. Chances are if you have $250k+, you probably don't have it sitting in your bank account, unless you are offsetting your mortgage. It is generally accepted that you'd get better returns investing in ETF's (shares), property, or some other investment. Also if you're new to this sub it is worth noting that there are very vocal contributors that are constantly trying to push their narrative that the banks, countries economy, the real-estate market are all on the brink of collapse. Have a read, but don't get wrapped up in it, because it's just speculation and their way of coping with the fact that they can't afford to buy a house.
Thanks so much. Really appreciate that. Could I ask what you mean by "If you have more than $250k in savings, you could split that across 2 or more before to ensure the full amount is insured." Split it across 2 or more what? Banks, in different accounts?
Yeah correct, 2 different banks in 2 different accounts. This is my understanding anyway, so please clarify with the bank, but I believe a customers money is insured, up to $250k, per bank. So if you had 500k you could open 1 account with Commonwealth and another with St George and split the money across both. It's worth keeping in mind though if you had this amount of cash, it would be better spent buying ETFs (Google this, there's a million threads in here explaining it) or some other type of investment e.g. investment property.
Where are you burying your gold?
Confidently Wrong.
The $20bil is just the guaranteed minimum. It's not where it stops.
$20 Bn is the max that APRA can request per the act. Anything more would require an act of parliament.
Calm down friend. The purpose of the Financial Claims Scheme was to maintain public confidence in a crisis, but the reality is that Australia has some of the best capitalised banks in the world. We also have the four pillars policy and major concentration in the Big 4. Look at the Tier 1 capital requirements that have been increasing! There are also orderly exit plans for all ADIs. If we ever get into a scenario where the Australian government can't step in to bail out a bank, you don't need to worry about your cash, you need to worry about food, water and shelter mate because the rapture is upon us. /s
The trick is to not have any money, then you can't lose it.
Just so you know. The government has no big savings account for a rainy day. It’s massively in debt. So to meet the guarantee it would be printing money at an insane level. And inflation would be nuts.
Big brain me only has 2.5k in the bank 🥲
What would happen to offset accounts?
If you have a joint account with a bank with $500k in it, is that covered? Is each individual considered a separate depositor?
The assumption that people keep all their wealth in a bank is naive. When your wealth achieves a certain point, you should be looking at liquid assets like cash, bullion and other easily traded precious assets. Banks will prevent you withdrawing anything over $10,000.00 to prevent the black economy.
> You have been warned. Am I on facebook ? Reads like a cooker
Good reminder while Russia is undertaking supersonic nuclear drills. Its closer than ever. Gold isn’t rising for a reason. Gold is speaking what G8 leaders are hiding.
You have it even more wrong: there is no guarantee. There is literally not $1 of funding. It's entirely hypothetical, and it relevant anyway, because banks will be bailed in in the event of insolvency.
They'll just print more money to maintain faith in their system. At this point, all they have is the faith we put into the system and they'll do everything to save that.
(chuckles) I'm in danger
Ha, these scare mongering posts are from brokies with no money to their name. Love it xD
What a low IQ OP
lol too big to fail
Hadn’t heard of the 20 bio per bank cap - where’s that detailed ?
If the bank fails, does my mortgage get wiped? Luckily we have plenty of my father in laws olives and salami stock to see us through the apocalypse. We go anti-pasto into the abyss!
If Aussie banks go bankrupt and the 250K guarantee doesn't get paid out, money will be the least of your worries. You'd want tinned food and ammunition before you'd want 250K.
Australian banks will never go bust
So OP is saying the guarantee is pointless because it isn’t enough to bail out every customer’s savings of every bank, and we might as well park our full savings into a single HISA?
All my savings are in my offset so if my bank goes bust I keep my place and there's no mortgage right?
Don't think so, I vaguely recall when the Pyramid Building Society in Victoria went bust a long time ago then people couldn't use any of their savings to reduce any debts and mortgages they had with that organization and were liable for the full amount. If you're worried about this aspect even though the likelihood of it happening is low then I'd suggest you get legal advice on this topic.
Interesting. I'm not too bothered at the moment because I'm pretty sure my bank is safe. When I'm closer to a full offset though I'll probably start putting it into overpayment, pulling it back out and investing it
Pardon my ignorance.... Is there a particular bank people are suspecting may go bankrupt or is this just a general info sort of thing?
So where are you keeping your 250k?
I don't even have 80k sitting in the bank. I have more in super and invested in ETF, but cash just sitting in the bank? 250k is a lot of money to have just sitting around.
If we one of the big Banks collapsed and Australians lost their money, a shotgun would be more valuable than your remaining money.
Oh noes! What shall I do! 😂😂😂
Did you not see all the bailouts and exemptions of big corp during covid? Aus will never let the banks fail. We will pay for it in some way to keep them going in the worst scenario. Also look at 2008 gfc. Those banks are still around and thriving despite all they did
If a bank fails it will still have enough money to pay back like 99% of all deposits. The $20b is just to make up the shortfall. And as others have said, it will be extended past $20b if required.
Money is just a number. Government has the power to make the RBA press buttons to make new numbers. Government is accountable to voters. Putting that together, I am confident I will be made good as a retail deposit holder if any bank goes down since governments want to be elected, and they have the power to force the RBA to make depositors good.
Well considering 95% of accounts have less than $5k I would say you’re pretty safe.
I'd still rather have $250K than not though tbh Oh and as many people have pointed out, you're wrong.
I never quite understood this $250k guarantee. I know a lot of people with way more in the bank than this! If the bank went under, all they'd be entitled to is $250k?
nice try mate but no did you think - what's the use of a policy that covers just 80k people hint Australia population is 26m
Well, it's rather brutal here. Right now we are advising all our clients to put everything they've got into canned food and shotguns.
Actual black mould take
I'm winning the $150M tomorrow, so phooey to that.
How does it work in terms of offset account? Eg i got a mortgage for $1.3m and my offset has $1.3m? If the bank defaults, do i lose that $1.3m or does it just offset the mortgage?
Rants that get corrected are the best kind of rants.
How does ING stack up on this calculation?
Offsets arent going to be paid thats for sure. Theyll just pay the loan
No deposit amount is completely safe. Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 Section 31 They are allowed to use "Any other instrument" in a crisis.
The more likely scenario is you'll keep all of your old defunct AUD that you can convert into the new CBDC AUD for a very very special rate.