As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among themselves and that must be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, posing a huge risk to the financial system. To avoid potential disaster, the Dodd-Frank Act gives preference to derivative claims. „Under current laws and regulations, APRA is not able to require banks to deposit deposit accounts,“ Byres said. While a bailout situation in Australia is currently a highly unlikely scenario, amid the coronavirus crisis and the deepest recession since the depression, people are feeling more nervous about their financial future. According to the RBA, APRA`s adjustments to Basel III standards have increased banks` core capital positions from 1% to 1.5% of risk-weighted assets.29 Concerns have been raised about the impact on Australian banks` ability to obtain international financing – as they disclose lower capital ratios than equivalent banks overseas. And potential funders may not be aware that this is due to more conservative capital standards. In August 2020, APRA published a second discussion paper on the capital framework for FDI30, which presents the following options to improve the international comparability of capital information of Australian ADIs: Unlike capital requirements, liquidity requirements apply to both locally registered ADIs and ADIs, which are local branches of foreign banks. The RDC will increase the competitive pressure on banks by eliminating the information advantage they have over their current customers. It will also reduce barriers to market entry for businesses currently mainly operated by banks, including loans and insurance, by making it easier for new entrants to assess customers` risk profile and set prices accordingly.
These deposits all have a similar theme: the need to remove all legal uncertainties to put an end to the „legalized theft of bank depositors` savings“. Bank protection mafia calls for impunity for `bail-in` agents – 26 May 2021 – Australian Alert Service As explained in this ABC News report, the „bail-in“ mentioned by Hjalmby is the opposite of a bailout of a state-owned bank during a financial crisis. While a bailout refers to the government`s guarantee of Australians` bank deposits, a bailout refers to a scenario in which the bank ensures its financial survival by taking deposits and exchanging them for shares. While the IMF does not define what „international best practices“ look like, Mr. North and Mr. Adams notes in their observations that there are already international examples of „legal bailouts“ in New Zealand, the European Union, the United States and Canada. The CDR is subject to the general legislation of the Competition and Consumer Act 2010 and the Privacy Act 1988, with sectoral rules and technical standards containing detailed requirements for the implementation of the Act in certain sectors and with regard to certain types of data (e.g. bank account transaction data). While the RDC is currently overseen by the ACCC, the Senate Committee on FinTech and Regulatory Technology recommended in its interim report the creation of a new national regulatory authority responsible for the implementation of the RDC to ensure greater efficiency and accountability. 27 Due to possible inconsistencies with the obligations of responsible persons under the accountability regime for bank administrators, APRA committed to establishing a strategic timetable to update CPS 520 and CPS 510, with consultations to begin in 2023; APRA, APRA`s Policy Priorities (February 2022), p. 19: www.apra.gov.au/sites/default/files/2022-02/Information%20Paper%20-%20APRA%E2%80%99s%20Policy%20Priorities%20February%202022.pdf.
First, it says the 2018 law allowing bailouts of hybrid securities also uses the words „any other instrument“ about them, without defining what that means. The data to be provided to APRA under the FSCODA includes both general financial information, such as a balance sheet of financial position,24 and specific information on certain types of assets and liabilities related to banking services.25 Reporting standards require monthly or quarterly reports to ensure that APRA has access to up-to-date data, to support their decision-making. APRA collects data under the FSCODA both to facilitate the exercise of its supervisory functions and for statistical purposes. Data collected by APRA is also shared with other regulators and the Australian Bureau of Statistics, and summary statistical data is made available to the public. With a bailout of the bank, the bank uses money from its unsecured creditors, including depositors and bondholders, to restructure its capital so it can stay afloat. In fact, the bank has the right to convert its debt into equity in order to increase its capital requirements. A bank can quickly be bailed out through resolution, providing immediate relief. The obvious risk for bank depositors is the possibility of losing some of their deposits. However, depositors have protection from the Federal Deposit Insurance Corporation (FDIC), which insures each bank account up to a maximum of $250,000. Banks are required to use only deposits that go beyond the $250,000 protection. On January 29, 2020, NAB announced its intention to acquire Australia`s Neobank 86400 for approximately A$220 million.53 In May 2021, NAB merged Neobank with its digital subsidiary UBank to enhance its technology platform and mobile banking systems. Australia`s banking sector is dominated by the big four banks – Commonwealth Bank of Australia Limited (CBA), Westpac Banking Corporation (Westpac), National Australia Bank Limited (NAB) and Australia and New Zealand Banking Group Limited (ANZ) – which are by far Australia`s largest banks, accounting for almost 80% of total banking assets.
The big four banks also make up four of the seven largest companies by market capitalization listed on the Australian Stock Exchange. Other institutions, including mutual financial institutions, local operations of foreign banks (whether they operate through a local subsidiary or not) and specialised financial service providers, also conduct banking operations in Australia. Australia`s banking sector is globally interconnected, with the big four banks (and Macquarie Group Limited) operating overseas and most of the global banking groups operating in Australia. In 2018, banks` behaviour towards their customers came under extensive public scrutiny by the Royal Commission on Misconduct in Banking, Pensions and Financial Services (Royal Commission on Banking), which revealed serious misconduct in the financial sector and recommended a number of legislative reforms relating to consumer credit and non-bank financial services, usually provided by banks in Australia. Most of these recommendations have been transposed into legislation with a variety of reforms implemented in 2021. The year 2021 has brought a number of changes and challenges for the banking sector. Although the impact of Covid-19 has been delayed, the federal government has continued its legislative changes to implement the recommendations of the Royal Commission on Banking. Public scrutiny of the big four banks continued as many class action lawsuits continued on behalf of consumers for violations. The Financial Sector (Transfer and Restructuring) Act also allows APRA to determine that all or part of the banking activities of an ADI must be transferred to another entity. PRAA may make such a decision if the Treasurer has determined that a mandatory transfer of banking transactions should take place, or if PRAA is satisfied that the transferring entity has violated the Bank Act, has informed ADI that it is unlikely to be able to meet its obligations or suspend payment, or if a statutory director has been appointed to FDI. APRA can also only take the decision to forcibly transfer banking operations from an ADI if it is satisfied that the acquirer consents to the transfer (it cannot force another FDI to take over the banking activities of an ADI) and if the treasurer has consented to the transfer (or has determined in writing that his consent is not required).