Something I didn't know: National is quietly planning to impose a Cyprus-style bank-robbery should a bank fail in New Zealand:
The implementation of OBR would see all unsecured liabilities that rank equally among themselves, including deposits, having a portion frozen. The Reserve Bank says the OBR policy could save taxpayers' more than NZ$1 billion regardless of whether there is a bank failure or not.Full details of the scheme are here. And indeed, in the event of a bank failure, we get robbed so that banks can keep operating. Supposedly this will "strengthen incentives... on creditors to provide greater external scrutiny". So, in Treasury-land, we're all expected to be forensic accountants and assess banks for financial health before entrusting them with our money. I bet they think it will also "strengthen incentives" on bank managers - who get golden handshakes and bonuses regardless - to avoid bankruptcy. Oh wait, they do.
However, Norman points out that if a bank fails under OBR, all depositors will have their savings reduced overnight to help fund the bank’s bail out.
“(Finance Minister) 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,” Norman said.
This isn't acceptable. Kiwis need to be able to trust their banks. And we can't trust them with this policy in place. Instead of robbery, we need a proper deposit-insurance scheme, one which isn't open to South Canterbury Finance-style rorting. And if National won't give it to us, we need a government which will.