It was only in 2012-2013 that Bank of Cyprus seized depositor funds and it seems like that Australian government has this in mind for us here Down Under. I wonder how many of our federal members of parliament (MPs) are aware of what sneaky legislation/regulation is being considered.
The press release below expands on this topic. Any feedback and comments by blog readers in other countries would be appreciated.
Citizens Electoral Council of Australia
Media Release Tuesday, 30 January 2018
Warning to MPs: More than 1,000 submissions to Senate inquiry prove Australians despise ‘bail-in’
Reflecting the overwhelming public opposition among Australians to losing their savings to prop up failing banks, the Senate Economics Legislation Committee revealed on 25 January that its inquiry into the APRA “bail-in” bill has received more than 1,000 submissions from the public. The vast majority of the submissions objected to the bail-in provisions of the bill, which would empower the bank regulator APRA (Australian Prudential Regulation Authority) to convert into worthless shares, or write off, the savings of unsuspecting mum-and-dad investors, and possibly depositors, in order to cover the gambling losses of banks and keep them afloat.
This is a stunning response—the average number of submissions to a Senate Economics Committee inquiry is 30! The submissions came from Australians who learned about the bill not from the media, which has largely blacked out any reporting of it, but from the Citizens Electoral Council. Once informed, a large number were motivated to write to the committee to express their objection. Unlike most politicians who reply to their constituents with identical form letters written by their superiors, the people who made submissions went to the effort to write their own letters.
In the face of this many submissions, which were made before the 18 December deadline, it is clear that the committee’s subsequent decision not to hold a public hearing is a cover up. A hearing would allow a public examination of the content of the submissions, including the all-important issue of whether the conversion or write-off provisions could extend to deposits, and concerns about APRA’s secrecy and complicity with the banks, which former APRA employees have raised.
The government, which controls the committee, does not want these issues aired. From the beginning, Malcolm Turnbull and Scott Morrison have tried to minimise publicity for this bill—and the media has accommodated them. For the same reason, Turnbull rigged the terms of reference for the banking royal commission to exclude any examination of APRA and its policies. However, the scale of the public response to the Senate committee sounds a warning to MPs: Australians who are informed emphatically oppose bail-in, so be prepared for an electoral backlash if you agree to pass this bill.
Bail-in extends to deposits
It is undeniable that the APRA bill clears the way for the bail-in of hybrid securities, which APRA allowed the banks to sell to hundreds of thousands of unsuspecting self-funded retirees and self-managed super funds. That alone is grounds to oppose the bill, but even more concerning is that the bill as written empowers APRA to extend a bank bail-in to deposits. Both the government and APRA deny this. For instance, APRA’s submission to the Senate committee states, with forcefully underlined words, that the bill “does not include a statutory power for APRA to write-down or convert the interests of other creditors in resolution, including depositors of a failing ADI (often referred to as a ‘bail-in’ power). … APRA also notes, and fully agrees with, the statement in the FSI [2014 Financial System Inquiry] Final Report that, in Australia, deposits should not be included within any such framework, and should not be subject to bail-in.”
As Shakespeare would say, “Methinks APRA doth protest too much.” Firstly, APRA does the bidding of the global banking regulation apparatus centred in the Bank for International Settlements in Switzerland, which since 2009 has overseen the implementation of a global bail-in regime that in every other jurisdiction applies to deposits. Secondly, the reassurances of APRA and the government are meaningless—the wording of the bill is what matters.
On 23 January the CEC lodged a supplementary submission to provide the committee with legal analysis that the bill is worded to ensure that APRA does indeed have the scope to extend a bail-in to deposits. Following is the summary of the CEC’s submission, which outlines the legal analysis:
- Summary of supplementary submission
In summary, this Supplementary Submission has been considered necessary as a consequence of communications by Members of Parliament to constituents which seek to allay constituents’ concerns as to the Bill’s provisions concerning “bail-in”—the conversion and write-off provisions—and in particular their extension to deposits. The communications contend that the Bill does not provide any authority for the Australian Prudential Regulatory Authority (“APRA”) to bail-in deposits in the event of an ADI bank getting into financial difficulties.
This contention has also been repeated by various Authorities.
Bail-in of deposits has caused considerable hardship overseas where it has been employed and is of increasing concern to the Australian community.
This Supplementary Submission is accordingly being lodged to draw to the Committee’s attention the relevant provisions in the Bill relating to bail-in (whether explicit or implicit) and the concerns of this organisation and the community generally as to the nature and extent of those provisions.
As elaborated in this Supplementary Submission:
- by all definitions financial “instruments” includes deposits;
- the Bill clearly states that its conversion or write-off (bail-in) provisions apply to Additional Tier 1 and Tier 2 capital or “any other instrument”;
- if the Bill only intended to refer to instruments which include conversion or write-off terms, all such instruments come under the definition of Additional Tier 1 and Tier 2 capital, and the additional clause “or any other instrument” is therefore unnecessary, but sufficiently broad language to give APRA scope to extend a bail-in to deposits;
- the author/s of the Bill’s Explanatory Memorandum foreshadow a future scenario under which this Bill will allow APRA to determine through its prudential standards that instruments not currently considered to be capital, such as deposits, could be reclassified as capital for the purpose of conversion or write-off—bail-in.
It therefore remains our contention that the Bill does provide APRA with power to bail in deposits and for this and the reasons appearing in our primary Submission of 18 December 2017 that the Bill should be rejected.
The CEC is continuing the fight to defeat the APRA bail-in bill—join us!
What you can do:
Make sure your MP and Senators are informed about this bill and the public’s opposition to it. Take or email the CEC’s submission and supplementary submission to your MP and Senators today (click here for links), and insist on a response in writing.
We hope you found this message useful.
Authorised: Robert Barwick‚ 595 Sydney Rd‚ Coburg‚ Vic 3058