Are your funds at the bank safe?

R

Raddles

HI there

Just wondering if anyone else has come across this.

I note that my MIL was visiting her broker yesterday, quite upset about the turmoil in the markets and her depleting nest eggs (as she is in her 70s) - and was advised to move her funds from Suncorp Metway to either the Commonwealth Bank or Westpac, not ANZ or NAB (due to their exposure to the financial crisis happening in the US).

Just also wondering - as has been raised in previous threads - what will be the impact upon funds available in lines of credit or in loans with a redraw facility. If we see a bargain and want to grab it - will the funds be available when we need it?

thanks
 
I've just heard the story of a lady who wanted to withdraw some cash from her BankWest account in England to put it in her super in Aus.

She applied to withdraw it early June but had massive trouble getting them to act on the request. They constantly "lost" paperwork and needed it replaced etc. It may have been gross, but simple, incompetence or it may have been that they just didn't have the money. Today we hear HBOS (BW's parent) has been "rescued".

Our banks are much safer but I'm not sure I'd trust them with my life's savings. I could say to buy gold but MILs don't do that sort of thing. :D
 
I would be more worried about if my car crashed and I needed to claim on insurance. I'm with AAMI and I think they are owned by AIG.
 
A basic refresher on how Cental Banks think:

CBs have three basic rules (in no particular order, save for rule 1):

1. Protect the system (that is the #1 rule)
2. Let the imprudent fail
3. Lend freely, but at a high rate

CBs will not guarantee any institution (for reasons of moral hazard). Their interest is in protecting the system. Sometimes to protect the system they have to lend to institutions. They tend to let dodgy people fail, but on occasion they will also save them (via loans) only because it is in the best interests of the system. When they do help out institutions it is always in the form of a loan (not a gift).

In the context of the Australian financial system what that means is open to interpretation.

However, anyone who bothers to apply some logical thought to the question invariably concludes that the big 4 banks (ANZ, CBA, NAB, WBC) are simply too big to let fail (effects on the system), as with Suncorp-Metway (because of it's strong presence in Qld and insurance activities).

Please remind yourselves that (in no small due to the collapse of HIH in 2001) Australia now as worlds-best-practice prudential standards.

It is no accident that of the 8,000 or so banks worldwide, there are only 16 or so rated AA or better, and 4 of those are Australian (ANZ, CBA, NAB, WBC).
 
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One of my banks sent me a loan variation which basically states that they can deny access to redraw if they think it would increase their risk. I had already drawn down all of it and put it in a safer place. I may be over cautious but I am relying on that buffer money should interest rates not fall fast enough or rates not rise fast enough.

I think these are the times that protecting your capital comes first and making money comes a far second.
 
It is the Investment Banks that are having issues in the US. Go-anna, if you have drawn down your loans but not using it as an investment purchase, then aren't you paying interest on something you can't negatively gear? And where is safe?
 
Pushka said:
It is the Investment Banks that are having issues in the US. Go-anna, if you have drawn down your loans but not using it as an investment purchase, then aren't you paying interest on something you can't negatively gear? And where is safe?
Click to expand...

I understand what you are saying but I don't think my bank feels the same way especially given their recent change of loan terms. And personally I wouldrather be wrong and my money safe than right and lose my money.

I have placed the money is a loan in another bank that I view as safer.

We all need to manage risks as we see them and how they would impact on us personally. For me a loss of a single tenant is really no issue at all but the loss of my buffer would be disasterous. Similarly I did not take a recent quite attractive commercial loan as it had periodic reviews and was far too controlling. The risk was too much for me regardless of the other features.
 
GoAnna, this type of activity is what can bring the whole system unstuck. Once people start to withdraw cash from the banks, this is what will cause them to go down.. since you have done this, I suspect others may be close to doing the same.

This is why I'm with the CBA, as I would hope 'they are to big to fail' but there is nothing to stop them giving access to redraw or offset accounts should them deem necessary to protect their interests.

I think I pointed out in another thread that banks can freeze access to redraw/offset accounts at whim without reason.
 
Not getting you there. The bank I withdrew my (loan redraw) money from is now earning more interest from me. Why does that leave them worse off? It's hardly everyone lining up to take their savings out.
 
Raddles said:
I note that my MIL was visiting her broker yesterday, quite upset about the turmoil in the markets and her depleting nest eggs (as she is in her 70s) - and was advised to move her funds from Suncorp Metway to either the Commonwealth Bank or Westpac, not ANZ or NAB (due to their exposure to the financial crisis happening in the US).
Click to expand...

SUN - confirmed it has NO exposure to LEH or AIG

WBC - less than A$10mil exposure to LEH

NAB - less than A$100mil exposure to LEH - but noted that includes funds tied up in funding "conduits"...?

ANZ - less than A$146mil exposure to LEH, of which USD$28mil is Lehmann Bros Holding Inc and USD$98mil is it's subsidiaries.

CBA - *just* announced a A$150mil exposure to LEH and left it at that, citing it was "working through" it's exposure...!

so, i would advise your MIL to get a new broker. :mad:
 
BNB - announced that it intends to undertake an on-market security buy back of up to 10% of its securities over the next 12 months. Purchases of securities under the buy back are expected to be fully funded from existing cash and proceeds from assets sales, including the recent sale of the Spanish wind energy portfolio, which is scheduled for completion later in the year.

BNBG - SELL recommendation across the board. worrying about breaching debt covenants thanks to asset writedowns.

BBIPL - Standard & Poor's advised it has lowered its long-term issuer credit rating on Babcock & Brown International (BBIPL), the entity holding BNB's corporate debt, to 'BB' from 'BB+' with a negative rating outlook. BNB advised the lowering of the rating will have
the effect of increasing the interest rate payable under BBIPL's corporate facilities by 50bps and would increase interest cost by $15M per annum if the facility was fully drawn down.

AIO - announced that it has issued 23,634,082 securities under its underwritten Security Purchase Plan (SPP). The total proceeds of the SPP are approximately $103,775,500 comprising $24,328,780 received as the proceeds of valid applications from eligible securityholders and an additional $79,446,720 received under underwriting arrangements. 5,659,711 AIO securities were issued to eligible security holders at an issue price of $4.30 which represents a 5% discount to the average of the daily VWAP.

MQG - advised that a report in 'The Australian' claiming MQG needs to refinance $45B of debt including $5B by March 2009 "could prove difficult to get away" is false and inconsistent with information provided to by MQG. Since 31 March 2008, MQG has raised
term funding of $6.4B and also increased deposits from $3.8B to $17B in the 4 months to 31 July 2008, and has an undrawn $3.8B senior credit facility. The author did not provide MQG with an opportunity to respond to these claims.

from Kinetic Securities.
 
GreatPig said:
While that's true, are you suggesting that individuals should put the greater good before personal (financial) security?

GP
Click to expand...

I'm not suggesting anything. I'm just stating the fact that if everyone starts to withdraw cash from the banks, it will place pressure on them..
 
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