You might remember what happened in Greece and Cyprus when depositor’s money was confiscated by the bank? This is a “bail in” as opposed to a “bail out” where the government gives money to the bank – the depositor becomes an unsecured creditor of the bank.
What’s the problem? After all, the Government guarantees your deposit up to $250,000 per entity per ADI (Approved Deposit Taking Institution)?
Very quietly last year the Financial Sector Legislation Amendment (Crisis Resolution Powers And Other Measures) Bill was passed with just seven senators present. It is too complicated to go into here, but if you want to chat about it over a coffee, please call me. It is effectively a Bail In.
The government has also recently considered changing the guarantee legislation by placing the amount guaranteed into a schedule, which means it can be varied without going through the parliamentary process, the Cabinet alone can approve it.
Couldn’t happen in Australia could it? So why are the rules being changed. Where is your money safe? You might like to re-consider the trade off between a bank and income producing property.
Watch this space.
