Citizens Electoral Council of Australia

Media Release Monday, 4 December 2017

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

CEC of Australia at epicentre of fight to block dictatorial powers for global megabanks’ “regulators”

The sudden agreement of Australian PM Malcolm Turnbull to the creation of a royal commission on banking has everything to do with the campaign carried out since September by the Citizens Electoral Council of Australia, to block the Australian Treasury’s attempt to give dictatorial “crisis management” powers to the Australian Prudential Regulation Authority (APRA). The proposed law is the enabling legislation, the existence of which the CEC uncovered in 2013, for “bail-in”—the confiscatory model under which the assets of shareholders, bond-holders, and even depositors may be seized when a big bank is in trouble. The CEC is opposing this scheme with a mass mobilisation to dismantle APRA and, instead, implement Glass-Steagall banking separation to protect normal bank lending against cancerous speculation.

The issue is of global importance, since APRA is a sub-unit of the international nexus that sets global rules to save the speculation-ridden “too-big-to-fail” banks at the expense of human welfare and lives. It is an unelected, secretive body established in 1998 as a de facto subsidiary of the Bank of England’s Prudential Regulation Authority (PRA) and the Bank for International Settlements (BIS). Wayne Byres, chairman of APRA, formerly headed the BIS Basel Committee on Banking Supervision (BCBS). The BCBS “Core Principles for Effective Banking Supervision”, issued in 2012, mandated that supervisory organs like APRA be able to operate without government interference.

Below please find the latest two CEC media releases on APRA, bail-in, and Turnbull’s turnabout. At the end of this document are links to other releases issued during this campaign.

Turnbull caves in to demands for banking royal commission, but orders it not to investigate APRA

1 Dec.—Prime Minister Malcolm Turnbull and the banks have jumped before they were pushed, agreeing 30 November to a banking royal commission that they hope they can control. The justified fury of the Australian people, who have neither been assuaged by the government’s assurances nor swayed by the banks’ scare campaign, has forced the government into this action. Just a day earlier Westpac’s head of businesses banking David Lindberg warned that an inquiry could push the nation into recession and “economic collapse”. Yet within 24 hours Westpac and the other three major banks wrote to Turnbull suddenly claiming to support a royal commission.

Turnbull, a.k.a. Mr Goldman Sachs for having made his fortune with Wall Street’s most predatory bank, is now desperate to control the outcome. Within minutes of receiving the letter from the Big Four, he released a joint statement with Treasurer Scott Morrison announcing the terms of reference. The royal commission would not be “the inquisition into capitalism that some have called for”, it stated.

Turnbull will obviously do everything he can to ensure that, but as former Prime Minister John Howard warned on Sky News on 23 November, royal commissions can get out of control. Attacking the idea of a banking inquiry as “rank socialism”, Howard said that “you put a successful segment of the Australian business community in the dock, and that’s what happens, and royal commissions go on and on and often go beyond their remit”.

APRA off limits

Turnbull pre-empted legislation for an inquiry so he could determine the terms of reference, which are much weaker than those which the Greens and rebel Nationals had been negotiating. The most glaring and most telling difference is that Turnbull’s terms of reference order the commission not to inquire into the Australian Prudential Regulation Authority (APRA).

Term 5 states: “The Commission is not required to inquire into, and may not make recommendations in relation to macro-prudential policy, regulation or oversight.” (Emphasis added.)

This means that the Royal Commission is not allowed to look into the powers and practices of APRA, even though it is the bank regulator, and the banks committed the abuses that triggered the royal commission under its supervision! In fact, in terms of the banks’ rural and businesses lending practices which have especially incensed the National Party, APRA incentivised them to aggressively and destructively foreclose on farms and businesses, by rigging their capital “risk-weightings” to make home loans far more profitable than business loans.

So why are APRA’s operations the one area of the Australian banking system off limits to the Royal Commission? For the same reason Turnbull’s government has been trying to discreetly legislate sweeping new crisis resolution powers for the regulator: APRA is part of the global regulatory structure centred in the Bank for International Settlements (BIS) and Financial Stability Board based in Basel, Switzerland. Before he took over as chairman of APRA, Wayne Byres was Secretary General of the BIS’s Basel Committee on Banking Supervision.

This international apparatus has zero credibility in terms of bank regulation, having overseen the frenzy of speculation that caused the global financial system to collapse in 2008, a collapse still ongoing. It allowed the banks worldwide to speculate in financial bubbles, including the various national property bubbles, and gamble like crazy in toxic and often fraudulent derivatives, running up a $1.2 quadrillion ($1,200 trillion) global bubble of derivatives gambling debts. Then, when the system crashed, it rushed to implement a global “bail-in” regime to protect the Too-Big-To Fail banks, by forcing their innocent customers to pay with their life savings to keep them afloat, instead of forcing the banks to change their ways. Turnbull’s APRA bill, the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017, is intended to bring Australia into line with this global regime.

So it can coordinate the global bail-in regime to protect banks, the BIS apparatus demands operational independence for its various national agencies, such as APRA (in fact APRA’s Wayne Byres wrote the BIS policy insisting there must be no “interference” from governments). Turnbull is ensuring that the royal commission can not make recommendations for Australia’s banking system that get in the way of the BIS-APRA bail-in agenda.

Banking system in damage control—make your submission!

The CEC and its supporters can claim credit for forcing the government into this blatant defence of APRA, by their efforts to expose and stop the APRA bill. The CEC exposed that the bill definitely gives APRA powers to bail in hybrid securities that it allowed the banks to sell to hundreds of thousands of self-funded retirees and other retail investors, by converting those securities into worthless shares, as well as other broad powers that in an emergency could be used to seize deposits. Following thousands of calls and emails, the Greens referred the bill to the Senate Economics Legislation Committee for scrutiny. It is now clear that this infuriated Turnbull, the banks and APRA, and forced their hand on the royal commission so they could draft the terms of reference to block any more scrutiny of the APRA bill and the structure of the banking system. Turnbull and Morrison’s joint statement revealed as much, declaring: “We will ensure that the Inquiry will not defer, delay or limit, in any way, any proposed or announced policy, legislation or regulation that we are currently implementing.”

The CEC’s mobilisation is shaping these developments, so now is the time to escalate. The Senate Economics Legislation Committee inquiry into the APRA bill is now the most important inquiry in Parliament, as it is investigating the issue the government doesn’t want touched! The submission period for Senate inquiry closes on 18 December—write a letter to the committee today!

(Click here for instructions on how to make your submission.)

Europe to extend ‘bail-in’ to guaranteed deposits—don’t give crisis powers to banking technocrats!

29 Nov.—When the government and financial authorities assure you your deposits are guaranteed, don’t believe them. They have proven time and again that in a financial crash they will put the survival of banks and their powerful owners first. The latest example of this is a European Union move to amend existing “bail-in” legislation to enable bank regulators to freeze even bank deposits that are covered by a government guarantee. The derivatives speculators who cause banking crises will be exempt from the EU’s “moratorium” on bank withdrawals, but not so the people’s daily access to their savings!

Presently the Australian government is trying to legislate crisis resolution powers for the Australian Prudential Regulation Authority (APRA) that could be used to bail in depositors, all the while assuring the public their deposits are guaranteed up to $250,000. Europe’s experience shows that once regulators go down the path of bail-in there is no end, and in their desperation to prop up a failing system they will look for ways to grab everything they can.

‘Pre-resolution moratorium’

An 8 November European Central Bank (ECB) opinion paper “on revisions to the Union crisis management framework” declares open slather on deposits and unsecured debt. The proposal would amend the EU-wide Bank Recovery and Resolution Directive (BRRD), which as of 1 January 2016 introduced a bail-in regime to Europe, to include a “pre-resolution moratorium tool”. This would allow banking authorities to freeze deposits for five days in financial institutions that are “failing or likely to fail”—including those guaranteed by governments. In the EU that means all deposits up to €100,000.

The moratorium tool would allow unelected banking technocrats to “suspend payment and delivery obligations” on deposits, and thereafter determine whether depositors can “withdraw a limited amount of deposits on a daily basis” to cover the cost of living. Incredibly, this is described as a “limited exemption on a discretionary basis”, i.e. the freeze on withdrawals would be the rule, access to your own savings for living expenses would be the exemption. The ECB claims the new “far-reaching powers” will be “exercised only in extreme circumstances”, where “the competent authority determines that it is not possible to apply less intrusive measures”.

The moratorium won’t be a one-off. The ECB concedes it could repeat such five-day freezes under extenuating circumstances, which it assuredly would have to under conditions of a global financial crash; the ECB paper doesn’t propose any safeguards, merely saying that successive moratoria should “as a rule” be avoided.

The ECB states that the new moratorium tool is necessary to provide banking authorities time to determine if a bank must be put into resolution. They argue the bleeding obvious: that if guaranteed deposits are not included in the moratorium, depositors would rush to withdraw their funds to “ensure uninterrupted access”, believing a bank failure imminent. This would be “counterproductive”, said the ECB. No kidding, but it only confirms the insanity of bail-in, as it actually destroys confidence in banks.

Eyeing off Asia

A new report by ratings agency Moody’s, titled “Banks–Asia-Pacific, Asia’s bank resolution reforms show mixed progress”, reveals the urgency in the drive to finalise a cross-border bail-in framework in Asia before a new crisis hits, in order to protect global derivatives trades. “In most APAC [Asia Pacific, including Australia] jurisdictions, authorities still lack statutory powers to bail in creditors”, Moody’s moans in a 20 November press release announcing the report. “Basel III contractual securities [so-called “hybrid” or “contingent convertible” (coco) bonds which convert to worthless shares in the bank during a crisis] remain the only type of bail-in-able instruments in most markets”, and represent only some 2 per cent of bank assets in APAC banking systems. “Only Hong Kong and New Zealand authorities have the power to bail in depositors, and only unprotected depositors in the case of Hong Kong”, the release complains.

The solution: people before gambling debts

In the 2007-08 global financial crash, banks were bailed out to arrest the meltdown of the Too-Big-To-Fail (TBTF) banks’ US$1.2 quadrillion (!) in derivatives bets. To pay for this bailout, governments borrowed massively and then imposed brutal austerity budget cuts which crushed their economies. Quantitative easing (central bank money-printing) reinflated the speculative bubble that caused the crash, while lending into the productive economy declined.

In response to public rage that the banks that caused the crisis were bailed out, international financial authorities unveiled their new “bail-in” scheme—supposedly to have the banks’ creditors foot the bill instead of taxpayers. Where bail-in has been used in Europe, “subordinate bondholders” who are the equivalent of depositors have lost their life-savings, while taxpayers have still had to bail out the banks anyway! Bail-in is not sufficient alone, because no amount of deposits can cover the losses from multi-trillion dollar derivatives bets. Moreover, bail-in actually preserves the very flaw it was claimed to fix—TBTF banks. The Bank of England specifies that some banks can be allowed to fail without affecting the wider economy, but others that are too large or complex would destabilise the system and must therefore be saved. Likewise says the ECB opinion paper in regard to derivatives: they are too complex so can’t be bailed in, unlike “long-term unsecured vanilla [sic] debt”—vanilla meaning your savings! Exemptions from the new ECB withdrawal moratorium would also apply to financial market infrastructure including central counterparties (CCPs—derivatives clearing houses) and the transfers of the Bank for International Settlements (BIS), which designed the bail-in regime.

Every new aspect of bail-in is in fact a powerful argument for the opposite approach to banking security: the Glass-Steagall separation of deposit-taking banks from speculation. Glass-Steagall protects deposits absolutely, and guarantees financial stability by separating essential banking functions that support the real economy from the casino economy.

The CEC urges all Australians to register their disgust with the proposal to legislate bail-in powers for APRA, and demand Glass-Steagall instead. Write to the Senate Economics Legislation Committee which is inquiring into the APRA bill today; submissions close on 18 December—follow the instructions here.

Tell Parliament today: don’t let APRA steal our savings, break up the banks instead!
24 November 2017

Success! APRA ‘bail-in’ bill referred for parliamentary scrutiny—have your say!
21 November 2017

APRA ‘protects’ banks; time for bank regulation that protects people
15 November 2017

Questions MPs must ask before they vote on the APRA crisis management—‘bail-in’—bill
8 November 2017

Bail-in bonds ‘a ticking time bomb’
3 November 2017

Collapse of APRA’s property bubble has started—Glass-Steagall now!
2 November 2017

One month to stop APRA bank bail-in law
31 October 2017

Stop Morrison rushing through emergency powers for APRA. Tell your MP: replace APRA with Glass-Steagall, national bank
19 October 2017

Tell your MP: dictatorial powers for APRA will not prevent a banking crisis—go with Glass-Steagall now!
12 September 2017

Four days to have your say on banking ‘crisis management’ bill vs. Glass-Steagall
5 September 2017

Tell the Treasury: Don’t ‘manage’ the banking crisis, avert it—pass Glass-Steagall now!
22 August 2017

Click here for a free copy of the 22 November issue of the Australian Alert Service, which documents the disastrous instances where bail-in has been imposed in Europe.

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