...in order to fund bank bailouts. I guess the precedent has been set. No deposits are safe, anywhere.

http://www.scoop.co.nz/stories/PA1303/S0....

Quote:

The National Government are pushing a Cyprus-style solution to bank failure in New Zealand which will see small depositors lose some of their savings to fund big bank bailouts, the Green Party said today.

Open Bank Resolution (OBR) is Finance Minister Bill English’s favoured option dealing with a major bank failure. If a bank fails under OBR, all depositors will have their savings reduced overnight to fund the bank’s bail out.....

So it begins...

Sweet, NZ slightly bigger (roughly 4 x population - 4.4M) than Cyprus so we are moving up the chain. Who is next, Greece with 10M population?

Nice....

Yup, never trust anyone that says it's contained.

Holy ****. The world HAS officially gone full retard.

This morning, Santelli alluded to the US doing this through inflation

Someone on another thread said this has nothing to do with guns, bs.

There is a reason bankers don't want the people to have guns.

US 401k, retirement accounts and pension funds are going to get confiscated.

Banks in this country have been stealing from small depositors for some time.

They close your account if your balance falls below a certain level, and they take the money. One of my lesser motivated kids has had this happen a few times.

You know, "fees" and all.

Because if your account only has $20 (which they've levered up on at 20X or better) it takes so much manual labor to keep up with all those paperless statements ,etc

The interesting part here is that they have monetary sovereignty...

Idle account fees of $5/mo after a year of no activity? WTF is that? Banks robbing savers again... I'm telling you - they're doing everything in their power to disincentivize savings. My bank just created a new account paying 2.5% if you maintain $250 and make 12 electronic debits/credits per month. WTF?! I don't have that many bills, and I never use a debit card.

It's insane. I'm definitely considering the bank of sealy.

Ck,
The problem then becomes cashing checks. The majority of banks will charge you $5 (for now) to cash a check if you're not a customer. Some banks won't do it at all.

I'm not sure how they get away with it, because I'm not a customer. The real customer wrote me a check, which is a promise that his bank will come through with the money. Want to charge someone $5? Charge the account holder.

When ever I face that situation I get loud and it involves the bank manager. I make sure they know I'll never open an account there EVER if that is how they would treat a payee of mine.

I had a Wells Fargo refuse to cash a money order drawn on their branch. My son had purchased it for a deposit on an apartment deal that fell through. They told me I'd have to deposit it in my own bank and wait for the funds.

One impetus behind the OBR is to avoid taxpayer bailouts, so the RBNZ seems to have it right on this front. It also seems to have the pecking order correct:

RBNZ's "A primer on Open Bank Resolution" (.pdf):

http://www.rbnz.govt.nz/research/bulleti....

Partial quote:

Quote:

Under OBR, shareholders are the first to bear the bank’s losses, followed by its subordinated debt holders. If there are any remaining losses, these are then allocated to the bank’s unsecured creditors, including its depositors.

RBNZ's "Consultation Paper: Open Bank Resolution (OBR) Pre-positioning Requirements Policy" (.pdf):

http://www.rbnz.govt.nz/finstab/banking/....

Partial quotes (.pdf):

Quote:

[The OBR] places the cost of a failure in the first instance on shareholders but also provides the flexibility to assign losses to creditors without causing unnecessary disruption to the payments system, thus promoting the maintenance of a sound and efficient financial system.

Quote:

OBR is an option that provides the ability to allocate losses to creditors of the failed bank without causing unnecessary disruption to the payments system and bank customers’ access to liquidity. As a general principle, first losses are allocated to and borne by shareholders followed by holders of subordinated debt. Claims of subordinated creditors and other capital providers will be fully frozen and will not be available for payment unless the senior creditors were paid in full.

RBNZ's "Open Bank Resolution (OBR) policy--Q&A":

http://www.rbnz.govt.nz/finstab/banking/....

Partial quotes:

Quote:

Why should depositors bail-out banks?

The OBR policy is designed to ensure that first losses are borne by the bank’s existing shareholders. In addition, a portion of depositors’ and other unsecured creditors’ funds will be frozen to bear any remaining losses. To the extent that these funds are not required to cover losses as more detailed assessment of the position of the bank is completed, these funds will be released to depositors. At a high level, this outcome replicates the outcome that would apply in the event that a failed bank was liquidated. The primary advantage of the OBR scheme, however, is that depositors would have access to a large proportion of their balances throughout the process. This contrasts with what would happen under a normal liquidation, where depositors might not have access to any of their funds for a significant period.

Quote:

What happens to depositors funds during the OBR process?

The first stage of the process is to freeze all access channels to the bank and establish the balance of each account at the point at which the bank was placed under statutory management. A high-level assessment of the bank’s losses will then be undertaken, and a conservative portion of account balances frozen.

The frozen funds are then set aside to cover any losses beyond what the bank’s capital position could absorb. The frozen funds are not cancelled or written off, and the depositors and creditors continue to hold a legal claim to these funds. To the extent that all or some of these funds remain available after all losses have been covered, they will be returned to depositors and creditors.

Why would they make these discussions public? Seems to me they'd get their ducks in a row so as not to cause a bank run before the "tax" or fees are confiscated? No?

Quote:

This morning, Santelli alluded to the US doing this through inflation

At least the US has the decency to obfuscate things a bit.

Quote:

The OBR policy is designed to ensure that first losses are borne by the bank’s existing shareholders. In addition, a portion of depositors’ and other unsecured creditors’ funds will be frozen to bear any remaining losses.

why the fuk would i deposit my money in your ponsi scheme now ?

One of the problems with fully insuring bank deposits is that it allows you to park your money in a very shaky bank paying a very high interest rate and not worry about return of capital.
Why should someone receive 11% interest on a 5 yr CD when the bank has a high probability of being insolvent? Here is a rate sheet for Cyprus Bank: http://cyprusbank.org.ua/index/0-8

When Icelandic banks defaulted a few years ago, TFers were all in favor of Iceland not paying depositors because part of the problem was that Icelandic banks were paying ponzi interest rates. Those ponzi rates simply shifted down to Cyprus.

Bank of Sealy is the best. The old timers were right!

Argos,

Thanks for the links. For some reason, I was unable to find those while searching. I'm happy with the NZ solution as detailed by the RBNZ. IT gets the .gov out of the guarantee (and/or bailout) loop, and exposes the risk to the parties as appropriate.

I also appreciate Iflys comments, one has to wonder about the concept of providing 11% annual rate in the Eurozone... definitely should be in the TGTBT category. Junk banks should be in the same risk category as junk bonds (neglecting the wonders of uncle Ben).

IFly- Sovereign Risk and Credit Risk are two different things.