Depositors to bail out NZ banks?

[Ocean1]

Yeah good idea except mostly it didn't work - as Zedder spoints out.

The Federal Deposit Insurance Scheme in the US did work but only because the government stood behind it with more funds.

The idea of a guarantee is good but there is a problem - the guaranteeing insurance company/fund can go broke itself.

Instead there are the Basel II (now III) banking rules which require banks to have enough in reserve to meet a crisis. You don't need a guarantee if your bank is careful.

Hmmm, yet it's difficult to assess bank's behaviour, and therefore the level of risk against which to consider their returns on my money. Think I'll stick with more transparent investment vehicles.

Just as a matter of interest, I remember the recession of the late 1980s. The BNZ technically failed. Most banks were hurt badly, except for the National Bank. NB had lost its market share, shrank because of strict lending rules, and was laughed at. But in the recession NB hardly lost a dollar or a client.

That is the sort of bank you want.

Yeah, used to be you might get a mortgage if you banked exclusively with the bank in question and your credit record was good. I spent most of the 80's maintaining credible records with three of them, and by the time that was all in line most of 'em were reverse mugging anyone not actually a corpse.

As for NB, good example of prudent management no doubt, so explain why they didn't buy out ANZ.

[Winston001]

As for NB, good example of prudent management no doubt, so explain why they didn't buy out ANZ.

One of the examples of National Bank's prudence was buying the Rural Bank in about 1991. Farmers are committed borrowers, their livelihood is on the line and they pay what they owe.

NB however was always small. It was owned by Lloyds Bank of London and for reasons lost in the mists of time, Lloyds decided to sell. I suspect they needed the money.

ANZ by comparison is much larger bank despite tough patches in 1988 and 1997. Like all busineses they wanted to broaden their base and National Banks expertise in farming made good sense.

[BMWST?]

You can create your own money, if your house is perceived to be worth more than it was 10 years ago you can re-mortgage. Voila 100k pulled out of thin air. Then the price plummets back to its 10 year level and you loose your job can't make the payments and that 100k disappears even though you spent it already. Bank can't get it back by selling your house anymore.

they wont care if they need to sell your house for only 100 k to get their 100 k back which they can if you still owe them $1

[Winston001]

they wont care if they need to sell your house for only 100 k to get their 100 k back which they can if you still owe them $1

No no no.

There are very strict rules around mortgagee sales. Any money left after the mortgagee is repaid goes to the mortgagor (owner). That is extremely rare because by that time the debt is way above the sale value.

Banks hate mortgagee sales because its a complicated process, it costs them money, and there is always a risk of bad publicity.

I've dealt with half a dozen mortgagee sales in 30 years but on the other hand helped dozens of people sell on the market when they owed more than what they got at sale. Generally the banks write the loss off.

[Zedder]

Yeah good idea except mostly it didn't work - as Zedder spoints out.

The Federal Deposit Insurance Scheme in the US did work but only because the government stood behind it with more funds.

The idea of a guarantee is good but there is a problem - the guaranteeing insurance company/fund can go broke itself.

Instead there are the Basel II (now III) banking rules which require banks to have enough in reserve to meet a crisis. You don't need a guarantee if your bank is careful.

Just as a matter of interest, I remember the recession of the late 1980s. The BNZ technically failed. Most banks were hurt badly, except for the National Bank. NB had lost its market share, shrank because of strict lending rules, and was laughed at. But in the recession NB hardly lost a dollar or a client.

That is the sort of bank you want.

The problem with Basel III is the 6 year implementation period. Also, its critics believe it will stifle banking in general, and allow less risky products like government bonds, which don't require the same capital backing, to flourish dangerously. It's happened before.

Although deposit insurance is not really viable, banks do often increase their security and expand their business by simply buying insurance companies.

[mashman]

The problem with Basel III is the 6 year implementation period. Also, its critics believe it will stifle banking in general, and allow less risky products like government bonds, which don't require the same capital backing, to flourish dangerously. It's happened before.

Although deposit insurance is not really viable, banks do often increase their security and expand their business by simply buying insurance companies.

I can't begin to tell you how comical in itself that sounds. Yes I haven't looked up any details, but FFS they're talking about risk as if it isn't possible to manufacture a situation that can make that risk a reality. It's happened before.

[jonbuoy]

they wont care if they need to sell your house for only 100 k to get their 100 k back which they can if you still owe them $1

That's ok as long as the mortgage is only for a 100k - a lot of people were continuously re-mortgaging to the maximum - ie no free value in the property at all.

[mashman]

Switzerland...

Sport imitating politics:

Leaders Switzerland draw a blank in Cyprus
Cyprus 0-0 Switzerland
The visitors missed the opportunity to stretch their lead at the top of qualifying Group E to four points as they wasted several chances in Nicosia.

[Zedder]

I can't begin to tell you how comical in itself that sounds. Yes I haven't looked up any details, but FFS they're talking about risk as if it isn't possible to manufacture a situation that can make that risk a reality. It's happened before.

Basel III is meant to put things right for the future of banking but apart from taking too long to put into place, it will apparently cause grief for the standard system (commercial banks) by imposing rules that may greatly reduce the ability of banks to carry out their total range of business which isn't just lending.

Government bonds aren't addressed in Basel III and the critics are saying there's a danger of "here we go again" if it isn't sorted out because with the GFC, the real problem lay with the investment banks and hedge funds where traders dreamed up more and more "clever" ways to contravene existing rules on lending.

In short, many in the industry think the wrong people are being targeted and there aren't any rules to stop the ratbags as yet.

[blue rider]

consider this

Matt Tabibi

http://www.rollingstone.com/politics...-jail-20130214


and Elizabeth Warren

http://www.huffingtonpost.com/2013/0...n_2823618.html


yes, we the citizens of the country, this one here or elsewhere will bail out banks, or else ........lol

[mashman]

Basel III is meant to put things right for the future of banking but apart from taking too long to put into place, it will apparently cause grief for the standard system (commercial banks) by imposing rules that may greatly reduce the ability of banks to carry out their total range of business which isn't just lending.

Government bonds aren't addressed in Basel III and the critics are saying there's a danger of "here we go again" if it isn't sorted out because with the GFC, the real problem lay with the investment banks and hedge funds where traders dreamed up more and more "clever" ways to contravene existing rules on lending.

In short, many in the industry think the wrong people are being targeted and there aren't any rules to stop the ratbags as yet.

... you should take that shit to the comedy shack. With politicians in the pockets of the highest bidder it's only a matter of time before we're back where we are now. It happens with regular monotony (every 10/15 years) and Basel III and any other so called obvious and sensible rules and regulations aren't going to help avoid it. Systems are there to be rorted. As per blue rider's links, the "common man" does it and gets hammered for it and those who rort billions get away scot free... likely because of campaign contributions. There's something seriously wrong where that is the case and is isn't limited to the banks and their activities. EVERYONE who thinks they can get away with it will try. This is the reality of our "new world" and it isn't going to change coz the financial system can't be allowed to fail. The authorities can't monitor everyone... well they could but that'd be a hell of a world to live in (and is)... and if you are (or "own") the authorities, then who's monitoring you? Tis BS... don't, don't, don't, don't, don't believe the hype woooerrrrrrrrr

[mashman]

consider this

Matt Tabibi

http://www.rollingstone.com/politics...-jail-20130214


and Elizabeth Warren

http://www.huffingtonpost.com/2013/0...n_2823618.html


yes, we the citizens of the country, this one here or elsewhere will bail out banks, or else ........lol

Weez gotz to be gud little servants fur r massers. Tis amusing that the banks get blamed or we get blamed or business gets blamed and no one mentions the real elephant in the room i.e. the mechanism that allows, and always has allowed, the rorting to take place. Instead they believe that rules and regulations are gonna save them

[Zedder]

... you should take that shit to the comedy shack. With politicians in the pockets of the highest bidder it's only a matter of time before we're back where we are now. It happens with regular monotony (every 10/15 years) and Basel III and any other so called obvious and sensible rules and regulations aren't going to help avoid it. Systems are there to be rorted. As per blue rider's links, the "common man" does it and gets hammered for it and those who rort billions get away scot free... likely because of campaign contributions. There's something seriously wrong where that is the case and is isn't limited to the banks and their activities. EVERYONE who thinks they can get away with it will try. This is the reality of our "new world" and it isn't going to change coz the financial system can't be allowed to fail. The authorities can't monitor everyone... well they could but that'd be a hell of a world to live in (and is)... and if you are (or "own") the authorities, then who's monitoring you? Tis BS... don't, don't, don't, don't, don't believe the hype woooerrrrrrrrr

LOL, who says I believe the hype? I was just clarifying the situation for you 'cos you didn't look anything up remember?

Also, if you look at my first post in this thread I was doubting the idea of the depositors insurance scheme etc as being the answer to the problem.

[mashman]

LOL, who says I believe the hype? I was just clarifying the situation for you 'cos you didn't look anything up remember?

Also, if you look at my first post in this thread I was doubting the idea of the depositors insurance scheme etc as being the answer to the problem.

Oh you do. You know you do . Ta muchly, but it isn't anything new really is it.

You did indeedy... and my post was generic, not aimed at anyone in particular and for some reason Public Enemy popped into ma heed. You should still take that shit to the stage though.

[Winston001]

Instead they believe that rules and regulations are gonna save them

Yes, rules and regulations do save people. The dispensing of medicines is regulated to protect people, medical procedures are regulated, land ownership is regulated, food safety is regulated, driving on our roads is regulated. That is how a society works, by establishing sets of rules and laws to knock off the rough edges of the unscrupulous.

The criticisms made are that all rules/regs become out of date, inefficient, difficult to implement or non-existant. Sometimes our leaders simply get it wrong - the elastic building regs which led to leaky homes is a classic example.