Government should tell the public the banks could steal from them

March 3, 2013

“The Government should come clean and tell the public they are authorising the banks to steal money from their customers if a bank fails.

Deirdre Kent, a spokesperson for the New Economics Party, said they were waiting for the Minister of Finance to reply to a letter asking if he planned legislation to authorise banks to freeze part of their customers accounts in the event of a bank failure and use it to bail out the bank. “This practice is being called the deceptively bland name of Open Bank Resolution (OBR) and is being characterised as preferable to taxpayer bailout or a bank failure. We want neither customer bailout nor taxpayer bailout. We want the Government to investigate ways to make banks stable in the first place so there is no risk of a run on the bank. The way they are structured at the moment is that not everyone can come for their money at the same time.“

Ms Kent said the Reserve Bank has told them that 'The Bank continues to review the legislative framework that applies to OBR and will seek legislative amendment if the review suggests this is desirable,’ which presumably means they hope the current legislation will be good enough and they don’t have to alert the public that a portion of their bank accounts might be stolen from them.

“There are now five minor political parties and two organisations joining the list of groups supporting a petition for a Parliamentary Enquiry into the best ways to make banks stable, yet we still have no idea if there is going to be legislation authorising customer bailouts of banks.“

She said that the Minister of Finance said on February 27th that the Reserve Bank will invite submissions on OBR soon.

“We can’t tell whether the current law is adequate to let unsecured creditors like ordinary bank customers take more of the risk than overseas pension funds and overseas banks who were secured bank creditors. It is not fair on ordinary bank customers,” she said. “The bank took the risk and its shareholders should take the brunt of any failure”.

Ms Kent said the petition was supported by the New Economics Party, Positive Money New Zealand, Democrats for Social Credit, the Awareness Party, the Living Economies Educational Trust, the Mana Party and the Maori Party.

ENDS

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