An urgent depositors “bail-in” update

Via Martin North:

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. Hard to know what to do with my massive deposit.
    Leave it in the bank and maybe get bailed in. Leave it in aud and lose value.
    I think the massive bust is happening as we speak and I wonder about the capitalisation of our banks. How safe are ubank and rams for example? Citi would be safer imo

    • TailorTrashMEMBER

      Above your comment on my iPad there is an ad for UBank……”we are taking the pain ….out of the home loan process “ …..with an up drifting balloon attached to a house ………now there is some symbolism……..
      I also have funds in UBank …….and have often thought given its ease of use being a pure digital online bank it would be just as easy for NAB to fold it at any time and my dosh with it
      ………..above story needs to get as wide coverage as possible to dry to flush out Scomo et al to make some explanations on this bail in question

    • I have under the $250k cap with Rabo here. (guarantees ha!) and some money in an Irish bank account and USD based equities (offshore). That’s how I’m trying to mitigate the risk of bail in. It’s also why I bought several classic cars. Spread my money into assets. I still think I’m going to get slammed 1 way or the other.

    • CaptainFeatherSword

      put it into a US equities trading account and convert it to USD (interactive brokers, schwab etc)

      • No, you will be set up with a US bank account – like Mellon Bank NY, and you’ll be in the US proper. Now US bank exposure to Aus Bubble Banks? WFK? That will be interesting.

      • Les, they are not ADIs in Aus. They are US dollar assets in the US subject to US law. They have a govt guarantee for cash in broking accounts, I think it’s up to USD $100K. Note: this doesn’t include money market accounts.

        And you can buy US T Bills (3-12 month bonds) which currently yield about 2.2% and are as close to risk free as you can get (if you don’t think cash and indeed modern civilisation are about to become worthless, in which case join the gold, bullets and bottled water crowd). If you eventually intend to bring the money back, you have the forex risk of course. But you are out of Australia well and truly (except some tax).

      • @ Captain Feather Sword –
        “put it into a US equities trading account and convert it to USD (interactive brokers,schwab etc)”

        That may be about the worst suggestion ever. At some stage of the game the US $ is going to drop like a stone.Many Countries are working on alternatives to the US$ -Highly over printed & Trillions in debt.

        The links below may be of interest: — If This Doesn’t Scare You, Nothing Will
        5 Charts That Show Why Gold Belongs In Your Portfolio Now

      • Arrow2 Sorry to be more inquisitive here..
        I really want to know what insurance you speak of.

        I went here to get started

        And it does say it is not FDIC insured. So I called up the 1300 number on the website and the very nice lady from San Fran told me that they are not FDIC insured for the cash deposits held in brokerage accounts. But that, there is some other SIPC insurance but that’s not a govt guarantee.
        What gives?

        Edit: Nvm. Googled it.

    • That is the problem with the modern 30 year mortgage…it allows so much leverage that it can’t be effectively monetised.. We are far from the conditions that would sink the banks. The creatures of habit who rule us will use the same rule book that worked in 1890 and 1990…….that is you get half your money back over a 15 year period…..that is how long it takes to selloff the houses in a slump.

      Citi has got low leverage now but it is sort of zombiefied, but I can’t see the CIA letting the bank they use fail.

    • The banks are f56ked .. .zero are doubt about that.

      However, I think you’ll be lucky — I reckon the taxpayer picks up the tab with a recap of all the banks. The only caveat to that outcome is the sovereign rating — is that sacred or not? If the former then the depositors might be bent over.

  2. ASX listed equities with pure overseas exposure (i.e. those that aren’t exposed much to domestic demand) seems to be the safest in my view.

    Sure, share markets will get slammed. But a falling dollar should mean rising profits and increasing dividends for the most part.

    UOS, SDI, ANO to name a few.

  3. I don’t think the 250k will hold but they will have to guarantee at least 100k per person per bank and even then there will be turmoil. Imagine the business confidence in this country if company account funds get frozen and bailed in? Not to mention standard depositors too. This place will turn into Venezuela pronto. I think they will print like no other and devalue the money instead

    • adelaide_economistMEMBER

      Pretty much this. An actual legit deposit bail-in seems almost like the very last thing they would do when they’ve got so many other ways to effectively steal the wealth from people in less obvious ways. People don’t really understand the monetary system at all but they will notice that they or their parent/grandparent’s bank account just took a 20 or 50% haircut. Will they comprehend a 20 or 50% reduction in real spending power through inflation or other controls though? Not so much. They’ll just feel (and be) poorer but it won’t be so obvious who did it.

      • Agree with you both. A collapse in the private sector will be offset by an expansion in the public sector (issuance of government bonds), concomitant with a falling AUD. Troubled assets will be swapped out of the private sector into the central bank in exchange for reserves that will be used to buy government bonds. Superannuation portfolios will end up being stuffed with government bonds as mortgage backed securities blow up. Lost decades will ensue as Australians slowly work to fill the FIRE black hole through ongoing inflation and taxation.

        Now if only we had a government that actually knew what to do with a firehose of funds being pumped into it from the central bank via the member banks, rather than blow it all on corrupted private-public partnerships that benefit an elite few globalists.

      • Hi Med
        Where’s the exchange rate going to be at? I’ve always thought the degree of devastation will depend on whether we are in or out of sync with the US in particular and, to an extent, with the EU.
        If the US is out of sync then the old SWAPS trick isn’t going to happen.

    • Just imagine how much existing credit money would be wiped out- no printing press would be able to match bank money creation of last two decades unless RBA starts adding zeros to our notes.
      In a country where M1 represents a tinny fraction of money supply everyone is still afraid of printing? People have no idea what the money is and how it gets created.

      • Most people commenting understand ‘printing’ in terms of creating money of any sort out of nothing. Printing is just a word that covers a host of evils.

      • Doc Not sure what you are saying? (and not trying to be a smarta..e – Happy to hear contra ideas.)
        Lowering rates in the face of a US tightening, as prescribed by MB, will require ‘printing. RBA stuffs ‘money’ into the overnight money market.
        Financing government deficits – which will be immense, without blowing IR’s to hell and gone, will require printing” depending on whether it can be backed by foreign borrowings and at what price. What sort of a mess this makes to the currency depends on how much we have lost our capacity to borrow (or sell more assets)

        The current property bubble is pretty much financed from offshore (well strictly speaking the results of it are – it’s a constant debate) so it doesn’t constitute ”printing’ as most people understand it. Printing is what govts/CB’s do with our currency one form and another without offsetting arrangements like foreign borrowings.

    • I take some comfort in the fact that in 2008 in Ireland no bails in’s occurred. Instead we got the ECB printing press firing up and austerity measures instead. Still shyte, but I didn’t have any money taken off me in literal terms.

      • That’s a point. We can print and one would assume that is the option they’ll take. Greece and Cyprus couldn’t print. So inflation to the moon rather than bail-ins.

      • The Traveling Wilbur

        I’ve got this option over a new Disk Operating System – is there anything you think we can do with that? PS LOLd hard.

      • Captain hindsight would recommend bitcoin at 1/4000th its present value in 2012.

        And selling it all mid December last year before buying it back at 1/3 the price. That captain is a real champion.

    • I did, buy Alphabet back then, but I also sold it back then.. Alphabet has taken a hosing also. It was at $1250 a month ago. Now down to $1070… Hurts a little.

  4. having had direct exposure to the functioning of our national parliament and making of legislation – my take, and given last 10 odd yrs, is it’s a combination of stupidity with a back ground of actual deception and corruption ……….. think it would be a last resort after the many more indirect paths are taken but it is a real risk that has to be allowed for in your personal financial planning ……

  5. Restricting withdrawals / redemptions is also a form of soft bail-in. This is standard behaviour for financial institutions in a crisis.

    “Don’t worry mate, your money’s all there, trust us, you just can’t have it right now”.

  6. a bit of scaremongering here… Remember the hierachy:

    Equity gets wiped out first, then hybrids, sub-debt, senior debt, then deposits…. plenty of things to get wiped out first especially with the majors.

    • I have the 66 page “NAB TERM DEPOSITS (Including NAB Farm Management Deposit) Terms and Conditions Effective 12 February 2018” in front of me.

      I can’t see where there are the clauses that say they can convert or write off a deposit, or say that they can change the TCs at any times, which they are alleging….

      The HTML version is here at:

      • which says,
        Changes to government fees and charges
        In writing, electronically or by media advertisement
        As soon as practicable after, but no later than 3 months after the change takes effect.

        A bail in will be government.

    • I don’t trust that TPTB will respect the hierarchy in which depositors are supposed to have super-seniority.

      When Cyrus blew up, the rules were simply changed to enable deposits of over 100,000 euros to be raided. The President of the Eurogroup of eurozone finance ministers (Jeroen Dijsselbloem) caused a minor market panic when he admitted that what was done in Cyprus would be a template for how things would be done in the future:

      “If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders

      I don’t think it’s scaremongering, it’s sensible caution based on what actually happened and what was actually said. As markets responded negatively to the “template” news, Dijsselbloem subsequently back-tracked on the commonly reported word “template”, but in the years that followed, central banks and governments went right ahead and implemented policies that were perfectly in line with the “template”.

      Here we are looking at the Australian version of the template. Lax exactly where it needs to be to enable the template to be followed.

    • bolstroodMEMBER

      All G-20 countries had to have bail in legislation in place by 2018
      Our mob passed the legislation at the dead of night , without even a quorum in the Senate, in late December 2017.
      Just saying’.

      • proofreadersMEMBER

        With off memory, that ex-banker, turned greenie Whish-Wilson nonchalantly accepting something in writing from APRA to the effect that depositors were not intended to be bailed in? Wonder how many light-bulb moments about APRA, ASIC and the RBA he has had from the RC?

  7. blindjusticeMEMBER

    How long until an awareness builds among the public ?
    Here is an interesting timeline……Irish property peaked in April 2007….by September 2008 the banks were bust. How much of that collapse was brought forward by GFC events in the US? Here we are a year into price drops already. Once the developers stop selling property then the banks stop getting paid.
    I really hate to see that a great country like Australia followed the same stupid path to financial destruction so soon after it happened others.

  8. If someone could ease my mind, i have my money tied up in junior miners, (through commsec). Are shares safe if CBA bails in?
    Jacob og (there is another jacob, and me being computer illiterate i cant change my name)

  9. For me, this is when Australians will come with the pitch forks that many on here want to see but think Aussies are too lazy to do. But if you take away economic prosperity from Aussies (through both a massive property crash and bail-ins) with the royal commission ringing in the ears of the public, who can point a massive finger at the banks and government for the problems, I think these are the conditions for said pitch forks…

    • Your average mug bogan will lose his shirt and temper. For sure… the only thing that has pacified most is rising equity in their homes.

      • So what? Not like they can actually do anything. It’s not like we ever had a real gun culture, but Johnny confiscated them all anyway, so we’re left with… angry hashtags?

  10. Put it into a AU Government bond ETF?

    The way I see it, they could throw savers under a bus, but the government would be mad to default on their bonds.

    • Even better: hold the bonds (google ASX traded government bonds). Ok this is getting pretty paranoid but an ETF is just a fund that tracks a bond index. If the fund or fund administrator (Barclays, Blackrock etc) goes broke then your shares in the fund are worthless. Not saying I really think this is going to happen – just that it is a (small) risk and the ETF is not quite the same as holding the bonds yourself.

      • innocent bystanderMEMBER

        I’m not sure all ETFs are synthetic. ETF USD for instance is said to have hard USD currency in the bank underpinning it.

      • True IB agree completely, the point is even with a non synthetic ETF you are investing in a fund, you don’t own the underlying asset (USD, bonds, tech shares, whatever it is, even if the fund does).

        I agree the risk that this becomes a problem is quite small. I would not mention it at all except we are in a thread about absolute safety vs bail ins and where mistrust of the FIRE sector is high.

  11. Where people will get caught out is proving their funds were bailed in. If electronic systems went down I doubt many people could prove they had money in their account as most statements are online.

  12. What blows me away with this video is how little people know about the functioning of Parliament. Even highly educated people like this.

    Of course backbenchers have no idea what they’re voting on!! No-one (who knows anything about the functioning of Parliament) ever thought they did.

    This is one of the main counter-arguments in favour of genuine, direct democracy. If I may quote (from “Direct Democracy, or perhaps just Democracy”, starting at the bottom of page 5):

    The “uninformed” argument [made by opponents of Democracy] is factually misleading because the very same accusation could be levelled at of backbench parliamentarians.

    Parliamentarians simply don’t have the time – and often no inclination – to read and understand each and every piece of legislation upon which they vote. They rely instead on the Committee System. Individual politicians take an interest in specific areas of policy and recommend to their party colleagues how to vote, recommendations which reflect not only their assessment of evidence but the philosophy of their party.

    Exactly the same is true of democracy. The Swiss Constitution, for example, obliges Parliament to examine each popular initiative and recommend for or against it. The government prepares a booklet setting out the arguments for and against each proposition . More importantly, each party does the same thing and their voting recommendations are made available to the voters – just as they are to backbench politicians under purely elective government.

    If Australia had had citizens initiated veto, this legislation would have had far more eyes passing over it before it was finally ratified. (In Switzerland, for example, a veto can be called by any 50,000 petitioners. The legislation is then put to a popular vote and passes on a simple majority.)

    • bolstroodMEMBER

      From my comment above.
      October 11, 2018 at 10:10 am
      All G-20 countries have Bail in legislation in place.
      They were required to have this finalised by the end of last year.
      Our mob passed this into law, at the dead of night, without a quorum present in the Senate.

      Our elected governments do not even abide by the rules they do have.

      • I was referring to parliamentary procedure in general, not to this specific Act.

        No doubt Switzerland has bail-in provisions, but the terms may not be the same as Australia’s.

        The quorum question is interesting. Surely if a bill was passed without a quorum it would be challenged. I can’t imagine that this bill was passed illegally. If it has been – and given how contentious it is – surely someone would mount a challenge.

    • bolstroodMEMBER

      From memory the government used some procedural instrument to get around the lack of a quarum

      this from MN at about 5m30s in

      In fact, when the Bill came back to Parliament it went through both houses with minimal discussion (and members on the floor, the chambers were all but empty). And despite a proposal being drafted and with Government Lawyers in parallel to exclude deposits, it was passed on 14th February without this change, leaving the door wide open under “any other instrument”. All the verbal assurances are meaningless.

      • You learn something new every day. A quorum is required only if a division is called.

        Presumably there must be a bare minimum (2??) to decide whether or not a division has been called.

        This is a failure of the Committee system when both major parties are in agreement. The smaller parties just don’t have the manpower to study every piece of legislation, even in Committee.

        Of course, if we had a Democracy . . . . .

        . . . . a quorum of citizens could call for a veto vote.

        (For those who are afraid this would unnecessarily impede urgent legislation, Swiss Article 165 provides an exemption for Emergency Legislation with a duration of not more than 1 year:

        See also Article 141(b) for vetoes of Emergency Legislation with a term of more than 1 year.)

  13. adelaide_economistMEMBER

    No-one can predict the turns of our insane political system but when I think about depositor ‘bail-ins’ I contextualise it with the following:

    1. Australia has its own currency to debase in any way it chooses (and would be a more indirect way of impoverishing people than direct bail-ins) and leaves people’s cash nominally untouched but the real value down.

    2. Account restrictions (particularly over time) would have the same effect of reducing the real value of your savings without actually ‘bailing them in’ (nominally untouched; real value down). I can already see ScoMo or Shorten putting on a stern face and telling us it’s for the country that our savings are being frozen – but only temporarily.

    3. As others have said, they can raid superannuation (most people unless near retirement have a fairly tenous connection to seeing that wealth as theirs anyway) – and again, it might appear the nominal value is preserved but the real value will be less because presumably it will be converted to financially repressive interest rate govt bonds as per flawse example above.

    4. The CLF – this $400bn behemoth was created on a lie and remains in existence on an even more obvious lie. This is the ‘magic’ of owning our own currency. Multiple of these things to keep banks functioning by avoiding anything being ‘marked to market’ can be created with the stroke of a pen.

    5. During the GFC the RBA printed up lots and lots of notes to deal with people who panic withdrew funds – and they can and will do it again. You could have withdrawn $500k down to the cent (eventually) and kept every cent, yet house prices went up by what afterwards? Non-homeowners were already massively ‘bailed in’ back in 2008/9 and since.

    6. International context will drive what happens. It’s possible something hits this country harder and faster being on the periphery but if our international trading partners are still functioning ‘normally’ our authorities have way less scope for action even in the era of big brother. If even China can’t stem leakage of capital fully it certainly won’t be a possibility here.

    7. Policy deception rules the day. Let’s be honest, when was the last time we had a policy that was honest? Compare public statements about migration with the reality on the ground and see the difference. There is not only zero appetite but I suggest almost zero ability to implement hard policies anymore. When it comes to bail-in they will need to play populist so the only modification I would agree with is keeping balances at any one bank below say $100k rather than $250k because I can definitely see the poor and the house-indebted being OK with ‘rich savers’ taking whatever hit has to be taken. Let’s remember we are in a country where public debate regularly proclaims people (even in Sydney and renting) earning $100k pa are rich.

    • bolstroodMEMBER

      Throw in runaway Climate catastrophe and we are in for some “fun” times.
      Mind you a severe world recession would be the our best way of fending off said RCC in the immediate future.

    • I don’t disagree completely but in the last decade Australia has decimated what remained of its Industrial/ Manufacturing sectors. ALL of these products now need to be imported so debasing the currency is highly likely to create a liquidity crises, as in I’ll sell you stuff, but not for Aussie dollars. This suggests it’ll be business as usual but with goods priced in USD (or whatever the exchange rate is that day). This will dump the liquidity issues back onto the banking system. I suspect it’ll result in a classic liquidity trap, as in Yeah I’d really like to buy a new car but I can’t get the necessary finance or loans or cash.
      I’m not sure that anyone benefits if businesses and individuals can’t transact deals because of artificial liquidity constraints.

      • “”artificial””
        fisho – they aren’t artificial. If we can’t pull in offshore money then we just simply don’t have the dollars to buy goods. We can print all the A$ we like but if the A$, justifiably, has gone out of fashion’ then we are stuffed.

  14. ewsydney995MEMBER

    Could assets held in a broker account e.g. interactive brokers be confiscated. Or just the cash balance? Is it classed as an adi?

    • A comment above suggested CHESS registered shares should be safe. Not saying they are right, as I don’t know.

      Either way, spreading things around in various assets with various holders, with your general strategy in mind, seems prudent.

  15. Even StevenMEMBER

    This is conspiracy theory stuff. Whether there is technically some convoluted way to achieve depositor bail-in, is beside the point. It would only be done as a last resort – which is the way it has and always will be.

    By the way, technically depositor bail-in can be achieved at ANY time… simply by the Parliament passing it as law. Should we therefore start running around like headless chooks that the gubmint is going to start taking our money?

    The authorities have clearly said their primary focus is protecting depositors. Reading evil intentions into this is a big leap. And if there’s no evil intentions, there’s no problem.

    Incidentally, if a bank actually DID go insolvent, and all other forms of potential capital had been bailed in and exhausted, how else could you fairly pay depositors out except through all depositors sharing in some hair-cut (I.e. a bail-in)? In effect, if you have more than 250k with an individual bank, you are implicitly accepting such risk (no matter how tiny it may be).

    • “The authorities have clearly said their primary focus is protecting depositors.”
      They have also clearly said that immigration at current rates is not a problem, we are building enough infrastructure to keep up with population growth, and the banks are as safe as houses and really honest guys so no need for a royal commission into them.

      • Even StevenMEMBER

        The difference is that the government has clear motivations to juice the economy and budget via immigration. What motivation do they have for recklessly confiscating deposits?

        Thought not.