The National
Government are pushing a Cyprus-style solution to bank
failure in New Zealand which will see small depositors lose
some of their savings to fund big bank bailouts, the Green
Party said today.
Open Bank Resolution (OBR) is Finance
Minister Bill English’s favoured option dealing with a
major bank failure. If a bank fails under OBR, all
depositors will have their savings reduced overnight to fund
the bank’s bail out.
“Bill English is proposing a
Cyprus-style solution for managing bank failure here in New
Zealand – a solution that will see small depositors lose
some of their savings to fund big bank bailouts,” said
Green Party Co-leader Dr Russel Norman.
“The Reserve
Bank is in the final stages of implementing a system of
managing bank failure called Open Bank Resolution. The
scheme will put all bank depositors on the hook for bailing
out their bank.
“Depositors will overnight have their
savings shaved by the amount needed to keep the bank
afloat.
“While the details are still to be finalised,
nearly all depositors will see their savings reduced by the
same proportions.
“Bill English is wrong to assume
everyday people are able to judge the soundness of their
bank. Not even sophisticated investors like Merrill Lynch
saw the global financial crisis coming.
“If he insists
on pushing through this unfair scheme, small depositors can
be protected ahead of time with a notified savings threshold
below which their savings will be safe from any
interference.”
Dr Norman questioned the Government’s
insistence on pursuing Open Bank Resolution when virtually
no other OECD country uses it.
“Open Bank Resolution is
unprecedented in the world. Most OECD countries run deposit
insurance schemes which protect people’s deposits up to a
maximum ranging from $100,000 – $250,000,” Dr Norman
said.
“OBR is not in line with Australia, which protects
bank deposits up to $250,000.
“A deposit insurance
scheme is a much simpler, well-tested alternative to Open
Bank Resolution. It rewards safe banks with lower premiums
and limits the cost to taxpayers of a bank
failure.
“Deposit insurance will, however, require the
Reserve Bank to oversee and regulate our banks more closely
– a measure which is ultimately the best protection
against bank failure.”
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The average US worker remains concerned about their retirement even as
the stock market reaches new all-time highs. The WSJ reports new data
that shows the impact of stagnating wage growth and aging demographics
is combining to squeeze individuals as a depressing 57% of Americans reported less than $25,000 in household savings and investments. On the bright side, the latest and greatest ‘Cyprus’ tax limit appears to be €20,000, or roughly the $25K threshold in the US, freeing those ‘un’-wealthy citizens to keep their hard-earned private property. 
