Open Bank Resolution - you deposit used to help out faulting banks

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Forums › Finance and wealth management › Open Bank Resolution - you deposit used to help out faulting banks

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mattwnz

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#785126 21-Mar-2013 18:04

DaveDog:

Sorry but that is not diversifying. That is what many people who invested in Finance companies did, by spreading the risk across many finance companies, and one by one they mostly all failed, as they thought they were diversifying and spreading the risk, when they weren't. Once one bank fails, it is likely that others could follow as you get a run on banks as people get nervous. It is all about perception, which is why the government brought in a guarantee last time.
What this does show though is to use one of the big four banks to keep your money, as the government will most likely bail out the big ones, as they will affect the most voters.

DaveDog

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#785141 21-Mar-2013 18:35

mattwnz:
DaveDog:

Sorry but that is not diversifying. That is what many people who invested in Finance companies did, by spreading the risk across many finance companies, and one by one they mostly all failed, as they thought they were diversifying and spreading the risk, when they weren't. Once one bank fails, it is likely that others could follow as you get a run on banks as people get nervous. It is all about perception, which is why the government brought in a guarantee last time.
What this does show though is to use one of the big four banks to keep your money, as the government will most likely bail out the big ones, as they will affect the most voters.

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

rugrat

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#785154 21-Mar-2013 19:17

What i don't get, is how does taking say 10 percent of depositors money save the bank?

If i lost 10 percent of my money, I'd be so furious, that as soon as bank opened doors I'd be closing my account.

No bank can have most account holders closing accounts, so they'd go under as well.

It also sends message spend most of your money and not save, cause it can be taken at any time.

Byrned

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#785168 21-Mar-2013 19:54

Kyanar:
DaveDog: Yes - It would be very difficult to not have a bank account. However, You (as a depositor) can minimise your risk by diversifying and by controlling the amount of funds you keep in the bank. It is however, not my responsibility as a taxpayer to underwrite your deposits.

That's tripe and you know it. "Diversifying"? "Controlling the amount of funds you keep in the bank"? These things simply are not possible to the average person. The average person has maybe $300-$500 hit their bank account once a week, and it disappears within two days on bills and expenses. In this employment environment, a good chunk of these average people receive said money from the Ministry of Social Development (i.e. the Government) in the first place. "Diversifying" this is impossible.

Also, I think you need to remember that the people you're talking to in this forum are also taxpayers. You're not part of some special class of individual - we're part of the same voting class too.

Surely this average person you mention then who has $300-500 hit their bank and then it disappears in a couple of days will not be affected if their is no money in their account. Taking a "haircut" on nothing (or next to nothing) is nothing.

But they would benefit massively by the security that their bank will only close for a day or 2 and then reopen.

Kyanar

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#785170 21-Mar-2013 20:00

DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Ragnor

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#785753 23-Mar-2013 03:05

The banks can't just take the money, this only comes into affect if the bank is about to fail and goes in to government statutory management.

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DaveDog

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#785772 23-Mar-2013 08:27

Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

itxtme

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#785788 23-Mar-2013 09:28

DaveDog:
Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

You must have had a sour look on your face when they bailed out AMI, or doesnt that count because it wasnt an "investment".

DaveDog

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#785859 23-Mar-2013 12:51

itxtme:
DaveDog:
Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

You must have had a sour look on your face when they bailed out AMI, or doesnt that count because it wasnt an "investment".

As far as I am concerned - they had no business guaranteeing or bailing out those finance companies or AMI either. Ditto Kiwirail... My logic is simple. If the company is vital to the existance of the country, then it should be an SOE... Private companies should not be able to operate thinking that if it all goes west then the taxpayer will pick up the tab.

mattwnz

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#785875 23-Mar-2013 13:23

DaveDog:
itxtme:
DaveDog:
Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

You must have had a sour look on your face when they bailed out AMI, or doesnt that count because it wasnt an "investment".

As far as I am concerned - they had no business guaranteeing or bailing out those finance companies or AMI either. Ditto Kiwirail... My logic is simple. If the company is vital to the existance of the country, then it should be an SOE... Private companies should not be able to operate thinking that if it all goes west then the taxpayer will pick up the tab.

I can appreciate your point. However banks in a way are because they are all controlled by the reserve Bank, so they can't just do what they want, and they are tightly controlled. The other thing is if a bank was to fail, the reason why it failed is unlikely going to because of problems with the actual bank, but because of external problems with government or personal borrowing of the country as a whole. Nz does have very high personal borrowings which are a major worry. . It is also likely to be a domino effect that will affect most banks. Eg look what happened in the finance company sector where almost all of them failed. The fact is that any bank could fail tomorrow if everyone decided to take all their money out of the bank, as a bank wouldn't be able to call on its lending quick enough to pay people back. It is all about perception as to how safe people think their money is in the bank.

We do also have key infrastructure in NZ that aren't SOEs. There has been a shift to privatise things, and then control by regulation.

Dairyxox

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#790780 2-Apr-2013 15:49

This (OP) is now happening around Europe. Its kind of like a financial 'survival of the fittest'... except that those who blindly believe in banks will fail.

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mattwnz

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#790796 2-Apr-2013 15:57

I think it is clear that if any of the major 4 banks in NZ did fail, that the goverment would have no option but to bail them out, and I think people know this. It's happened in the past, and will happen in the future. This is why I would only use one of the big 4 banks, even if the interest rate isn't quite as good.

Beccara

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#790806 2-Apr-2013 16:08

DaveDog:
itxtme:
DaveDog:
Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

You must have had a sour look on your face when they bailed out AMI, or doesnt that count because it wasnt an "investment".

As far as I am concerned - they had no business guaranteeing or bailing out those finance companies or AMI either. Ditto Kiwirail... My logic is simple. If the company is vital to the existance of the country, then it should be an SOE... Private companies should not be able to operate thinking that if it all goes west then the taxpayer will pick up the tab.

Out of curiosity what political ideology do you subscribe to/best encompasses what you think

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DaveDog

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#790820 2-Apr-2013 16:20

Beccara:
DaveDog:
itxtme:
DaveDog:
Kyanar:
DaveDog:

It's still more diversified than just banking with one institution. All investments have risk. Putting your money in the bank is a risk. And I'm still waiting for someone to tell me why as a taxpayer I should underwrite that risk.

Because the government elected by more than one taxpayer says so. You are not the only taxpayer in the country.

And again, people don't get to tell their employer "I'm trying to diversify and spread risk. Deposit my salary into these 8 accounts please". Your ideas are patently ridiculous.

Rubbish. And many employers will allow you to deposit your salary into multiple accounts. It is not the role of government to underwrite private business. If you think it is - then your ideas are what are ridculous. Why stop at banks in that case - lets underwrite ALL businesses. Where do you draw the line.

You must have had a sour look on your face when they bailed out AMI, or doesnt that count because it wasnt an "investment".

As far as I am concerned - they had no business guaranteeing or bailing out those finance companies or AMI either. Ditto Kiwirail... My logic is simple. If the company is vital to the existance of the country, then it should be an SOE... Private companies should not be able to operate thinking that if it all goes west then the taxpayer will pick up the tab.

Out of curiosity what political ideology do you subscribe to/best encompasses what you think

I don't think any of them really do... Traditionally the concept of Government's not running business are quite right of centre - but then also believe in the welfare state and some interventionist stuff too - so maybe I'm a bit of a freak. I don't subscribe to Government running businesses - but then some businesses I guess that they have to (businesses that must not ever be allowed to fail for example I would advocate some Government control in)

Ragnor

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#791825 2-Apr-2013 17:43

If a bank is going to fail we should probably go the whole hog and nationalise it rather than just putting it into statutory management, that way we avoid the moral hazard of tax payers money being used to bailout private shareholders.. while still protecting regular consumers/depositors.

Unless statutory management also prevents this?

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