rba quietly increases banks’ bailout buffer , page-20

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    "Here in New Zealand the Reserve Bank is moving to add an Open Bank Resolution Policy (OBR) to tools it could potentially use in the event of a bank failure.

    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.

    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."

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    And the Reserve Bank of New Zealand responds:

    "If their bank fails, depositors have always needed to understand that deposits are not guaranteed. What OBR does is facilitate a rapid and orderly resolution of a bank failure – it does not change the fact that depositors and other creditor funds are at risk...

    The New Zealand Government has looked hard at deposit insurance schemes and concluded that they blunt the incentives for investors and banks to properly manage risks, and may even increase the chance of bank failure."

    Reserve Bank of New Zealand, Open Bank Resolution, 20 March 2013

    Source: http://www.rbnz.govt.nz/news/2013/5191943.html

 
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