Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697646260560.pdf (Australia)
Submission on the Banking Amendment (Deposits) Bill 2020 By: Catherine Archer I Date: 7 July 2020 To: The Honourable Senators of the Senate Economics Legislation Committee Senator Malcolm Robert’s proposed Banking Amendment (Deposits) Bill 2020 is focused on safeguarding ordinary peoples’ savings on deposit with Australian banks.

The clear need for this Bill is to legislate that safeguard.
Recent legislation enacted in this country, the Financial Sector Legislation Amendment (Crisis Resolution Powers …) Act 2018, of February two years ago, passed discretely in the Senate ‘on the voices’ on a Friday afternoon, opens the way to ‘Bail-In’ of people’s deposits in the event of a bankrupt Australian Deposit-taking Institution (ADI).
Independent legal advice confirms that the vague language employed in this legislation’s Crisis Resolution Powers allows the opening that could extend a bail-in to include deposits.

Certain Tier 1 and Tier 2 capital securities, known as contingent convertible (‘co-co’) or bail- in bonds, include bail-in in their terms and conditions.

Additionally, however, vague reference to ‘any other instrument’ creates the loophole that could extend a bail-in to include deposits.
Other G20 countries are not so vague in their jurisdiction in this regard.

For instance, New Zealand’s Open Bank Resolution is transparent in its requirement of bail-in of deposits to resolve a failing deposit-taking institution.

Other nations with clear legislation for depository bail-in powers include the USA, UK, Canada and the EU.
The test case occurred in the 2013 Cyprus bail-in of savings deposits of two banks in that country; at the very time the FSB website frankly asserted that bail-in legislation was ‘in-train’ in Australia.

The agreement to this Brussels-based Financial Stability Board’s (FSB) global bail-in framework occurred at the 2014 G20 meeting in Brisbane Australia, being described as ‘loss- absorbing capacity that would further protect taxpayers if these banks fail’.
It has already been admitted by the Senate Economics Legislation Committee’s 2018 enquiry into the Crisis Resolution Bill that it is based on the FSB’s Key Attributes; the bail-in of unsecured creditors, which includes depositors by definition, being the central power.
According to Australia’s Financial Sector Legislation (Crisis Resolution…) Act 2018, the initiative by the Australian Prudential Regulation Authority (APRA) to direct bail-in (of deposits) is to occur at the time of pending failure of an ADI.

However, this would be timed before the activation of the $250,000 deposit guarantee (at whim or discretion of the government), which is not currently enforced.
The so-called Deposit Guarantee is thus no guarantee but a dormant device which is often used to placate the unwitting populace of depositors and voters.

1 Banking Amendment (Deposits) Bill 2020Submission 81 Senator Robert’s Bill is thus necessary to establish trust in the security of people’s savings deposits as well as trust that our politicians stand by their recently repeated verbal and written assurances to their electors that bail-in of savings deposits will not occur in the event of a failing ADI.
Only the commitment and enactment of unquestionably firm legislation that clearly articulates the fact that deposits will not be bailed-in will suffice.

There is too much at stake not to do so, since assurances and letters to constituents are not legislated.

I implore the Senators to take their duty seriously: to hold a public hearing which calls experts to testify to this matter, in support of Senators’ well-considered decision-making.
I ask with urgency that the Committee and each individual Senator of Australia act in committed support of Senator Robert’s Banking Amendment (Deposits) Bill 2020.

2 Banking Amendment (Deposits) Bill 2020Submission 81