Ummmm – two warning alarms just went off

By   /   November 5, 2018  /   7 Comments

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With so much happening overseas and the likelihood of a major market correction looming, the Wellington Mandarins and top bureaucrats know the vast majority of sleepy hobbits have no concept of what might hit and are busy re-arranging the deck chairs on the Titanic so that when the panic kicks in they can point to the very little they did as justification for the salaries.   

Two warning alarms just went off.

The first is that the Government are moving to guarantee bank deposits in the case of an economic meltdown…

New Zealand tipped to follow OECD and guarantee bank deposits
New Zealand is being tipped to join the rest of the OECD in having a government-backed bank deposit guarantee scheme.

Kiwi households have around $170 billion on deposit with banks, and currently, should a bank fail in New Zealand, there’s no guarantee the Government would bail it out.

Under the Reserve Bank’s Open Bank Resolution scheme (OBR), depositors at a failing bank might have to take a “haircut” with some of their money being taken to recapitalise their bank, and get it open for business again quickly.

…if a bank fails and people lose the money their have deposited in the bank, the political backlash would be tsunami like. This would only be getting serious consideration if there was risk of it occurring.

The second alarm is this astoundingly critical review of the existing strength of the NZ Banks…

NZ banks slammed for not policing their staff’s behaviour
There are “significant weaknesses” in the way New Zealand banks govern and manage conduct risks and changes need to be made.

That’s the view of regulators the Financial Markets Authority and the Reserve Bank of New Zealand after undertaking a four-month review of conduct and culture at 11 banks which operate In New Zealand.

…this is serious criticism of the risk management profiles of NZ Banks and it pulls no punches…

Rob Everett, chief executive of the FMA said the governance of conduct risk – how boards oversee and monitor conduct issues in the banks required “serious attention”.

“Boards and senior management must address the recommendations and findings
from our review with urgency.”

Those recommendations include; greater board ownership and accountability, prioritising the identification of issues and addressing them quickly, strengthening staff reporting channels including whistleblower processes and removing all incentives linked to sales measures as well as revising sales incentive structure for frontline sales people and through all layers of management.

…the most concerning part are Adrian Orr’s comments…

Reserve Bank governor Adrian Orr said banks had a responsibility ensure customers receive products and services they understand.

“These products and services must be suited to customers’ needs on an ongoing basis.

“Failure in this responsibility exposes customers, banks, and the wider economy to unnecessary risk – as dramatically demonstrated by the recent Global Financial Crisis.”

…this sounds like the concern is that punters have been sold the same exotic financial products that cause the 2007-8 meltdown.

With so much happening overseas and the likelihood of a major market correction looming, the Wellington Mandarins and top bureaucrats know the vast majority of sleepy hobbits have no concept of what might hit and are busy re-arranging the deck chairs on the Titanic so that when the panic kicks in they can point to the very little they did as justification for the salaries.

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7 Comments

  1. Sam Sam says:

    This is either business confedience Cold War jitters or commercial and retail banks have been copulating cancer again.

  2. RED BUZZARD says:

    …”Government are moving to guarantee bank deposits in the case of an economic meltdown”….this is important imo and long overdue

    ….so BIG TICK on this for the new Government

    • countryboy says:

      @ RB.
      So? You think the NZ/AO tax payer should compensate the Kiwi depositor for the rapacious greed of foreign owned banksters then? If that’s the case and as a tax payer, I say fuck that!
      Here’s the thing, you who are lucky enough to have savings. Withdraw your money from the Big Four foreign owned banks and re deposit with wholly owned NZ/AO banks.
      And I’d say sooner rather than later.

  3. Dave Brown says:

    Banks are parasites. Wait for the meltdown and then nationalise the private banks with no compensation, to form one single state bank.
    But who will do it?

    • countryboy says:

      @ DB. Nail? You hit it dead on.
      While we still have the stench of little micky fay and davy square-head richwhite etc hanging over the 1990’s bnz debacle, what you suggest will never happen in tranquil little Nu Zillind unless a very public Royal Commission of Inquiry takes place
      In fact. A single nationalised bank would be a glaring, blazing light shinning on the true wealth that would, and should, have been available to us had it not been swindled away from us for generations.
      Remember folks?
      NZ/AO= larger land area than UK.
      NZ/AO= rich, fertile, lots of fresh water and we’re export orientated, historically supplying foods to wealthy EU and US markets.
      NZ/AO=4.3 or so million people.
      NZ/AO= broke as.
      Does anyone else wonder why that is? And we’re worried about the foreign owned banks threatening us with the spectre of taking our savings if they fail?
      And our government’s promising to essentially pay them out with our tax money for their greed?
      Yes. Big Tick Labour. And by tick I mean the parasitic kind that gets under the skin.

      • mike says:

        since the gfc ordinary Americans have turned there backs on the banks and joined local credit unions there are options available if we vote with our feet lets face all we need is basic banking without the flash over heads

  4. mike says:

    the worry is the size of the banks loan book in nz all these loans are concentrated in real estate there is a serious lack of diversification
    the sleepy hobbits are exposed to one great bubble