No surprises here for regular readers.
From today’s Australian Financial Review:
The federal government will prop up the budget bottom line with a new levy on banks that will be badged as providing insurance in case future bailouts are needed.
The Australian Financial Review has learned that the government’s economic statement, set to be released Friday, will contain a deposit insurance levy as recommended by the Council of Financial Regulators, which will raise funds to underwrite any Australian bank should it need assistance in the future.
The proposed levy would be between 0.05 per cent and 0.1 per cent. Presently, the government guarantees deposits up to $250,000 without charging the banks.
Actually, the AFR has it wrong. Or at least, incomplete.
Yes, the Council of Financial Regulators may have “recommended” this.
But the real shot-callers, are the banksters at the IMF and the Financial Stability Board.
Recently, we saw that the IMF criticised the 2007 Rudd Government’s deposits guarantee scheme, introduced in a panic in response to the GFC. They said that, because of the “extreme concentration” in the Australian banking system, the Rudd scheme “increased moral hazard greatly”:
Australia: Financial Safety Net and Crisis Management Framework. Source: IMF (click to enlarge)
The IMF’s suggested solution to this “moral hazard” problem, was to make the banks pay “premiums” towards a “reserve fund” that could be used to support payouts under a depositor guarantee.
However, the IMF also noted that even if a requirement for premium contributions was established, Australia’s banking system is so highly concentrated that “it may be difficult to establish a fund of sufficient size that the deposit guarantee would seem credible” –
Click to enlarge
So what we have now, is the Rudd Government doing what the IMF says — introducing a “premium” levy on the banks — to (supposedly) establish a “reserve fund” for the deposits guarantee scheme.
But according to the AFR’s “source”, what the ALP will actually use this fee for, is to fill some of their ever-growing budget black hole:
A senior source said the levy would build up funds “over time” and would take several years to reach the billions. He said it would raise less than $1 billion over the forward estimates but build over the outer years.
The revenue raised by the levy will also be added to the budget bottom line, helping the government offset a forecast plunge in revenues since the May budget and meet its target of returning to surplus in 2016-17.
“It won’t fix the surplus problem in itself but it will help,’’ the source said.
The source said while the money collected would count as revenue, should the fund ever be drawn upon it would count as expenditure.
What we have here, then, is a supposed “fix” to the deposits guarantee scheme.
A “fix” that even the IMF says is not “credible”, because of the “extreme concentration” in our banking sector.
A “fix” that means the banks will now take more money off you (fees), to pay the new levy.
A “fix” that the government will really use for political purposes — to make its ever-deteriorating budget numbers look better.
How long will it be until we get our first bank bail-in, I wonder?
Related info here:
IMF Says Rudd’s Depositor Guarantee Scheme “Increases Moral Hazard Greatly”
Australia Plans Cyprus-Style Bail-In Of Banks In 2013-14 Budget
G20 Governments All Agreed To Cyprus-Style Theft Of Bank Deposits… In 2010
IMF Tells Australian Lawmakers To “Prevent Premature Disclosure Of Sensitive Information” On Bank Bail-Ins
Moodys Warns Of Australian Banking Collapse
As I was saying (a week ago). This from the ABC –
Finance Minister Penny Wong would not comment on the reports but says a levy is something the Government has been looking into.
“The IMF and the RBA have put a view to the Government for a need for a fund to cover deposit protection,” she said.
Treasurer Chris Bowen is meeting with representatives from the Australian Banking Association in Sydney this afternoon to further consult on a possible deposit-protection levy.
Mr Bowen pointed to a report from the International Monetary Fund (IMF) which he says highlights a gap in Australia’s public policy when it comes to “provisioning for any potential bank or deposit-taking institution failure”.
The government will point to the IMF’s report, as justification for their action.
Conveniently neglecting to mention, of course, that the IMF also indicated that the real problem is the “extreme concentration” in our banking sector, and because of that, establishing a reserve fund is not a credible solution to the problem of convincing depositors (ie, deceiving them into believing) that their deposits are protected.
Reports that the “levy” will raise $733 million; banks to pass on the cost to customers; the money supposedly “quarantined” but the government will add the number to its Budget bottom line anyway, “for accounting purposes” (from the Guardian):
A new levy on Australia’s banks will raise $733m, adding to a tobacco tax rise worth $5.3bn to be unveiled in the Rudd government’s looming economic statement.
The government will create a financial stability fund recommended by the International Monetary Fund, the Reserve Bank of Australia and the Council of Financial Regulators, paid for by the levy on the banks.
The fund is designed as insurance in the event that a big Australian bank requires a bailout owing to global instability.
Er … owing to “global” instability?
We’ve plenty of internal instability to worry about. Just ask Moodys ratings agency.
The levy will be collected by the banking regulator, the Australian Prudential Regulation Authority, and deposited into a fund administered by a government agency. The money will be quarantined but, for accounting purposes, will go to the bottom line. The measure will help the government meet its surplus target for 2016-17.
The levy is not expected to take effect until January 2016. The government envisages imposing a notional 5 basis points levy on deposits of up to $250,000 for each account holder at every bank, mutual bank or credit union.
Banks are expected to pass the cost of the levy to their customers.
Which just goes to prove what a complete, total deceit a government budget really is.
A mass of shoddy “forecasts” and “projections”, cunning “revisions” and dishonest accounting tricks, all designed to make the government of the day look good .. for one day .. in May .. when they announce it.