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Citizens Electoral Council of Australia

Media Release Thursday, 28 April 2016

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

‘Bail-in’ update:

Dear Treasurer, are you kidding?

Treasurer Scott Morrison responded in an 18 March letter to a constituent’s concern about the “bail-in” policy—seizing deposits and retirement savings to prop up failing banks—now in force across most Western economies.

The Treasurer’s letter reveals he is either lying, or in complete denial about the real condition of Australia’s banking system.

He wrote, “I can assure your constituent that the Australian Government is not preparing legislation to seize bank deposits in times of financial instability.”

The CEC has two responses to that claim: 1) Australia’s closest political and economic partners—New Zealand, the USA, and the UK/EU—all have bail-in powers to seize deposits to prop up failing banks, designed at the Bank for International Settlements (BIS) during the period when the present boss of Australia’s bank regulator APRA, Wayne Byres, worked there; and 2) APRA stated in its submission to the 2014 Financial System Inquiry that it didn’t require special bail-in legislation, as it effectively already had bail-in powers under existing legislation.

Morrison: “The Australian banking system continues to perform strongly, Australian banks are profitable, well capitalised and well managed.”

CEC’s response: The claim of “well managed” is in obvious conflict with the cacophony of demands for a Royal Commission into the banks, while the claim of “well capitalised” is laughable. Morrison’s predecessor Joe Hockey also claimed, in similar letters denying bail-in plans, that Australia’s banks were well capitalised, yet APRA admitted last July that they required much more capital. Even then, Business Spectator’s Alan Kohler observed on 6 April that APRA is now bragging about a rise in actual bank capital from 5 per cent in 2007—just before the GFC, when the banks needed massive government guarantees to stay afloat—to “approaching 5.5 per cent” today: “A 5 per cent capital ratio wasn’t enough back then, and now it’s 5.3 per cent”, Kohler wrote. “That’s enough now? Really?”

Morrison: “The Government has a number of strategies in place to ensure the safety of deposits. Banks and other deposit-taking institutions such as credit unions and building societies are intensively supervised by [APRA].” (Emphasis added.)

CEC’s response: Mr Treasurer, are you kidding? ABC 7.30 on 5 April revealed an internal APRA report from 2007 confirming that the lax lending standards of Australia’s banks had created a bubble in the property market, yet instead of acting on it APRA’s then boss John Laker ordered the report be buried. Last year, APRA’s now boss Wayne Byres admitted at a Senate Committee hearing that the regulator was “caught a bit by surprise” at the ongoing decline in bank lending standards in recent years. This is hardly an example of “intensively supervised”—under APRA, the banks have run riot.

Morrison: “Depositors’ claims are explicitly protected by the Banking Act 1959. In the unlikely event of a bank failure, Australian depositors have priority claim on the assets of a failed authorised deposit-taking institution [ADI—i.e. bank, building society, credit union etc.] ahead of other unsecured creditors. This is known as ‘depositor preference’ and has been a long-standing feature of Australia’s financial system.”

CEC’s response: Depositors preference is not a guarantee—it simply means that depositors will be paid ahead of other unsecured creditors, or, put another way, bailed in last, after the other unsecured creditors have had their funds exhausted. In a major bank failure, involving a meltdown in the multi-trillion dollar derivatives holdings of any of the Big Four banks that blows a massive hole in their balance sheets, to avert a chain-reaction meltdown APRA will need to bail in everything it can lay its hands on, including deposits—and even then it won’t be enough.

Morrison: “Depositors are protected by the Government’s Financial Claims Scheme [FCS], which guarantees deposits up to a cap of $250,000 per person, per [ADI]. APRA administers this scheme and details are available on its website at: www.apra.gov.au.”

CEC’s response: Seriously, Treasurer, you should check before signing letters such as this. Haven’t you read your own regulators’ information? Australia’s Council of Financial Regulators (CFR), which includes APRA, noted back in 2009 that the FCS can’t work for deposits in the Big Four banks, which comprise around 80 per cent of total Australian deposits! The FCS makes provision for paying out only $20 billion to honour “insured” deposits in any single troubled bank, even though each of the Big Four individually has around $200 billion in insured deposits. The minutes of the 19 June 2009 CFR meeting recorded that, when discussing the deposit guarantee scheme, “APRA noted … failure by one of the four largest institutions would be likely to exceed the scheme’s resources.” The FSB’s own 21 September 2011 Peer Review of Australia Report stated, “The limit of $A20 billion per ADI would not be sufficient to cover the protected deposits of any of the four major banks …” (Emphasis added.)

The CEC’s latest New Citizen newspaper features a detailed report exposing bail-in as an evil scam concocted by the Crown/City of London and Wall Street elite, not for “financial stability” as claimed, but to bail out their megabanks as their system plunges towards the worst crash in history. They don’t care how many lives they destroy to do it.

The New Citizen states, “To defeat the Anglo-American financial oligarchy driving these threats, including bail-in, we must destroy the financial power of the City of London and Wall Street, and their Australian arm, the Big Four banks and Macquarie. A Royal Commission into the banks is insufficient. We must break up Too Big To Fail banks, through a strict Glass-Steagall separation of commercial banking, which includes deposits, from risky investment banking, stockbroking and insurance. We must also return to national banking, in which Australia’s original Commonwealth Bank was once a world-leader: a government bank to create and direct masses of public credit into nation-building projects, including water, power and transportation infrastructure, and expanded agriculture and manufacturing.”

The CEC has printed 200,000 copies of this newspaper for its 2016 federal election campaign. Every CEC candidate is committed to defeating bail-in and achieving Glass-Steagall. To support this fight, join the CEC and get involved in the campaign.

Click here for free copies of the May-June-July 2016 New Citizen newspaper for yourself and to share with others.

Click here for a free copy of the Australian Alert Service, the CEC’s weekly magazine reporting on the worldwide campaign to defeat bail-in, and free Australia and all nations from the financial control of the City of London and Wall Street.

Click here to join the CEC as a member.

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