New Zealand: Bank Bail in Capital of the World

Robert Barwick and Craig Isherwood of the Citizens Electoral Council (CEC) in Australia discuss how New Zealand is the “The Bail in Capital of the World”.

In this interesting video they look at one of the most troubled Western Australian suburbs Madura. Where house prices have fallen and many houses are up for sale. They consider the risks if this became more widespread across Australia.

But the second part of the video is of most interest to New Zealanders. From 16:44 mins they look at New Zealand in particular:

Derivatives

Given our recent article on derivatives, the content they cover is quite timely including:

How derivatives are used to enable banks to get around government legislation and hide their gambling. Simply by using derivatives to put crap assets with good assets and hide losses.

As illustrated in the below graphic. Note – they are talking about financial assets in general not actual gold:

Bank Derivatives - How they get around government regulation

How these types of derivatives might be what is sitting on Deutsche Banks books currently.

How Australian and New Zealand banks have large derivative positions too. Plus how they are hiding these derivatives.

See Derivatives – a Beginner’s Guide to “Financial Weapons of Mass Destruction” for more on NZ bank Derivatives.

The Risks in the N.Z. Banking System

Next they discuss how New Zealand is the bail in capital of the world.

Why has New Zealand suddenly started planning to guarantee bank deposits? Why has the head of the Reserve Bank of New Zealand said they are preparing for a once in 200 year event?

See New Zealand Bank Deposit Protection Scheme – Does N. Z. Have Bank Deposit Insurance? for more on how the proposed guarantee might work here.

Then they interview Joe Wilkes. A British real estate agent who lives in New Zealand. They talk about the risks in the New Zealand banking system.

For example, in New Zealand only 4 banks hold 85% of the mortgage debt. So without higher regulatory capital requirements, there is a risk of a “raid” by a parent Australian Bank. For example say Westpac ran in to problems in Australia due to their very high interest only mortgage book. They could come across to their New Zealand subsidiary bank to shore up the capital in the Australian parent bank.

So a parent bank in Australia could leave just 8.5% capital in a New Zealand bank.

Lending practices are not the same as in New Zealand but there are lots of similarities with Australia. Therefore there are risks here in New Zealand and the need for higher capital. See: Bank Capital Changes: What is the RBNZ Preparing For?

Full video below…

New Zealand Population Unaware of Bail In Risk

New Zealand was the first country in the world to enact bank bail in legislation

Most of the population of New Zealand remains blissfully unaware that when you deposit money with a bank, you are immediately a creditor of the bank. They are also unaware that currently we don’t have any deposit protection in place. They are also unaware of how the bail in process that is the Open Bank Resolution scheme works. See: Bank Failure | Could it Happen in NZ? | The Reserve Bank Thinks So

These are exactly the types of reasons why you should consider buying and holding physical gold and silver bullion.

12 July 2019 – The CEC Report – Mandurah Housing Bubble / New Zealand Bail-in

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