Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697646653582.pdf (Australia)
ELECTRONIC TRANSMISSION 9th July, 2020 Nathan McKean Senate Standing Committees on Economics PO Box 6100 Parliament House Canberra ACT 2600 Dear Committee Secretary and Senators, RE: Inquiry into Banking Amendment (Deposits) Bill 2020 My explanatory memorandum for making this submission: Most Australians have no choice in the matter, where it comes to being locked into banking institutions, as most of us are paid wages or government benefits, by way of electronic funds transfer.
When I deposit “money” with a bank or any Authorised Deposit Taking Institution (ADI), I am lending to them.

Therefore, the bank has a liability to repay me, retain that money securely and pay interest in the interim, for the privilege of leveraging off those deposits, to issue loans etc on which they profit.

Hence I am a creditor, not a bank shareholder or bondholder.
As per the product disclosure statement issued by the ADI when opening a bank account, I accept the terms and conditions provided in that document.

However, recent legal analysis provided by Solicitor Robert Butler indicates banks may change the terms and conditions of that “agreement” virtually without notice, upon a direction from APRA (Australian Prudential Regulation Authority) the industry regulator.

Would this action represent a breach of contract?


Interestingly, APRA is funded largely by the industries it supervises.

Who will take legal responsibility to compensate me for any loss in a banking collapse?
The Australian Government says, “trust us, your bank deposits are protected/insured by the Financial Claims Scheme (FCS).” Please refer to the attached letters received from Mr Llew O’Brien MP Wide Bay Electorate, Queensland dated 14/11/2017 and 28/11/2018 in response to my concerns regarding bail-in and other financial sector matters.

Former APRA Principal Researcher Dr Wilson Sy has revealed the FCS is not activated and as Mr O’Brien indicated in his correspondence, can be at the government’s discretion.
According to APRA’s May 2020 Monthly ADI Institution Statistics released June 30, 2020 there is a total of $2,278,485,000,000 total resident deposits held by Australian financial institutions.

https://www.apra.gov.au/monthly-authorised-deposit-taking-institution-statistics Does ‘Treasury’ have the capacity to guarantee deposits up to $250,000 per ADI (up to $20 billion per institution) and adequately underwrite $2.278 Trillion?
The key point for this Senate inquiry to consider, is a bail-in is designed to resolve a FAILING bank/s, whereas a government bail out would happen after the bank FAILURE event!

Given APRA’s write off &/or conversion provisions, as per the Financial Sector Legislation Amendment Crisis Resolution Powers and Other Measures Act 2018 - why would I accept that my bank deposits could be bailed-in and then be given worthless shares in an insolvent bank?

That is what bail-in represents.


Whether Banking Amendment (Deposits) Bill 2020Submission 144 the threat of a banking collapse in Australia is real or perceived, the idea of privatising bank profits and socialising losses, does not pass the pub test!

To restore my confidence in the Australian banking system, I support One Nation Senator Malcolm Roberts’ Banking Amendment (Deposits) Bill 2020.
To avoid any uncertainty or misunderstanding where bank deposit guarantees are concerned, I endorse the below listed Summary of Key Provisions of the Bill, which are self-explanatory: 1.

Insert a clear definition of “bail-in” and “deposit account” into the Banking Act 1959, as per Section 1 of the Bill.

2.
2.

The provisions of the Banking Act 1959 relating to bail-in (the conversion and write-off provisions of the Banking Act 1959) do not extend to the bail-in of a deposit account, as per Section 2 of the bill which provides that the reference in the Banking Act 1959 to the conversion and write-off provisions of the Banking Act applying to “any other instrument”, shall not include a deposit account.

3.
3.

Insert a clause into the Banking Act 1959 which confirms that nothing in the Banking Act 1959 or any other Commonwealth legislation gives APRA power to implement, authorise or direct the implementation of bail-in of a deposit account.

As per Section 3 of the bill, insert the definition of a “deposit account”.

4.
4.

Insert a clause as per Section 5 of the bill, into the Banking Act 1959 which confirms that nothing in the Banking Act 1959 or any other Commonwealth legislation gives APRA power to implement, authorise or direct the implementation of bail-in of a deposit account.

In conclusion, I am calling on the Senate Standing Committee to hold public hearings into the Banking Amendment (Deposits) Bill 2020.
This will enable the committee members to hear from experts in banking, economics and industry regulation to resolve any misunderstanding around the intentions of past changes to the Banking Act 1959 via the Financial Sector Legislation Amendment Crisis Resolution Powers and Other Measures Act 2018 and the newly proposed amendments, which this bill represents.

Yours Sincerely Nathan McKean Banking Amendment (Deposits) Bill 2020Submission 144 Postal: PO Box 283.

Maryborougl1 4650 319 Kent Street.


Maryborough 4650 Toll free: 1300 301 968 P: (07) L1 ·121 2936 F: (07) 4122 3968 E: Llew.OBnen.MPCa)aph.gov.au W: www.llewobrion.com.au LLEW O-'BRIEN MP Federal Member for Wide Bay LO/RH 14 November 2017 Mr NJ McKean Dear Mr McKean, I refer to previous correspondence in respect to your concerns about Glass-Steaga II legi slation.

As you know I made ministeria l representations on your behalf and I have now received a response from the Treasurer, the Hon Scott Morrison MP.
I enclose for your attention a copy of the Treasurer's reply dated 6 November 20 17.

You will see that the Treasurer has given an extensive explanation about the introduction of Glass-Steagall leg islation in the USA and has advised the re are no plans to introduce it to Australia.

He also sets out comprehensive information about changes to t he Financial Sector Legislation, recently introduced into parliament.

Tha nk you for the opportunity to be of service to you .
Please do not hesitate to contact me again if you feel that I can help you in any matter controlled by the Federal Government.

You may be assured of my ongoing commitment to put the people of Wide Bay first.

I will keep your concerns in mind and advance them at appropriate opportunities available to me, whenever and wherever the opportunity arises.

Yo urs sincerelY.
Yo urs sincerelY.

LLEW O'BRIEN MP Federal Member for Wide Bay Banking Amendment (Deposits) Bill 2020Submission 144 TREASURER Ref: MCI 7-007985 Mr Llew O'Brien MP Member for Wide Bay POBox283 MARYBOROUGH QLD 4650 Dear Mr or'° ~ Thank you for your personal representations of 29 September 2017, originally directed to the Minister for Revenue and Financial Services, on behalf of Mr Nathan McKean concerning Glass-Steagall legislation.
Your correspondence has been referred to me as I have responsibility for this matter.

The Government has no plans to introduce Glass-Steagall legislation in Australia.

Glass-Steagall legislation was introduced in the United States following the Great Depression and legally ensured the separation of retail and investment banking, with the intent of reducing risk of failure in the US banking sector.

The legis1ation was repealed in the US by the Clinton Administration in 1999.
Furthermore, the implementation of Glass-Steagall laws would not have prevented the Global Financial Crisis (GFC) and the collapse of major banks in the USA.

The GFC was primarily caused by the risky lending practices and inadequate capital levels of banks in the United States.

In Australia, the Australian Prudential Regulation Authority (APRA) is the pmdential regulator of the Australian financial services industry.
It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies, ru1d most of the superannuation industry.

APRA is funded largely by the industries that it supervises.

It was established on 1 July 1998.

APRA currently supervises institutions holding $4.9 trillion in assets for Australian depositors, policyholders and superannuation fund members.
APRA's role is to establish and enforce prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions APRA supervises are met within a stable, efficient and competitive financial system.

On 20 October 2015, the Government committed to provide regulators with clear powers in the event a prudentially regulated finwcial entity or financial market infrastrncture fails, as part of its response to the Financial System Inquiry.
I recently introduced to Parliament the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bil] 2017, which strengthens APRA' s crisis management toolkit in relation to banks and insurers.

Explanatory materials are provided to assist readers in understanding the Bill and can be found at www.aph.gov.au/Parliamentary Business/Bills Legislation/Bins Search Results/Result?bld=r5989.
The Bill includes amendments to the Banking Act 1959, insurance Act 1973, Life Insurance Act 1995, Australian Prudential Regulation Authority Act 1998, Payment Systems and Netting Act 1998 and Financial Sector (Business Transfer and Group Restructure) Act 1999.
Parliament House Canberra ACT 2600 Australia Telephone: 61 2 6277 7340 J Facsimile: 61 2 6273 3420 Banking Amendment (Deposits) Bill 2020Submission 144 2 These amendments enhance APRA's crisis management powers by providing APRA with: • • clear powers that enable APRA to set requirements on resolution planning and ensure banks and insurers are better prepared for a crisis; and an expanded set of crisis resolution powers that equip APRA to act decisively to facilitate the ordeirly resolution of a distressed bank or insurer.
The Government supports APRA's roles and functions as the best means of ensuring the stability of the fi nancial system.

I trust this information will be of assistance to Mr McKean.
The Hon Scott Morrison MP ~ I ¥ /2017 Banking Amendment (Deposits) Bill 2020Submission 144 Federal Member for Wide Bay 28 November 2018 ' LO/RH Mr MARYBOROUGH Q 4650 Dear Mr I refer to your recent discussions with my office and I thank you for your representations concerning the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017.
The legislation does not implement any sort of 'bank bail-in' policy that would allow the seizure of deposits in times of financial instability.

The Government has no intention of implementing such a policy.

Rather, the Government has a number of strategies in place to ensure the safety of deposits.

Depositors are protected by the Government's Financial Claims Scheme (FCS), which guarantees deposits up to a cap of $250,000 per person, per authorised deposit taking institution (ADI).
A wide range of deposits are covered under the FCS, including term deposits, savings accounts, call accounts, pensioner accounts, trustee accounts and retirement savings accounts.

While the Government retains discretion to activate the FCS when an institution fails, this discretion is underpinned by the Government's ongoing commitment to protect depositor interests, a commitment which the Government takes very seriously.

In addition, depositors' claims are explicitly protected by the Banking Act 1959.
In the unlikely event of a bank failure, Australian depositors have priority claim on the assets of a failed ADI, to the extent that depositors have not already been paid out under the FCS.

This is known as 'depositor preference' and has been a long-standing feature of Australia's financial system.

ADis are also intensively supervised by the Australian Prudential Regulation Authority (APRA).
APRA's statutory objectives include both protecting the interests of depositors and promoting financial system stability in Australia.

While it is suggested that these objectives may be conflicting, in the case of the failure of an ADI, the objectives of protecting depositors and promoting financial system stability would be very closely aligned.

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.. 2/ 319 Kent Street Maryborough QLD 4650 Phone: (07) 4121 2936 Toll free: 1300 301 968 Email: Llew.OBrien.MP@aph.gov.au Web: llewobrien.com.au JE1 llewobrienLNP "!JJ1 newobrienMP Banking Amendment (Deposits) Bill 2020Submission 144 -2- As certain examples from the global financial crisis demonstrated, retaining the confidence of retail depositors in a crisis is crucial to minimising wider contagion affects across the banking system.
Where attempts were made to impose losses on depositors, such as in the case of Cyprus, this led to severe contagion impacts which effectively undermined the whole financial system.

This shows that the pursuit of financial stability in a crisis is likely reliant on the protection of deposits; the objectives are complementary rather than in conflict.

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The legislation further strengthens depositor protections by reforming and updating APRA's resolution powers, and by amending the definition of 'prudential matters' to explicitly reference protection of the interests of depositors.

This will in turn strengthen APRA's powers to manage the failure of an ADI is an orderly way in order to protect the interests of 9.epos~t~rs.

I trust that this information is of interest to you.
Yours sincerely LLEW O'BRIEN MP Federal Member for Wide Bay Banking Amendment (Deposits) Bill 2020Submission 144