Regulating Bankers

Written By: - Date published: 8:16 am, June 25th, 2019 - 76 comments
Categories: Economy, Financial markets, grant robertson, john key - Tags:

I have given our Minister of Finance some grief on this site before,but it is hard to fault him for his timing or his delivery in seeking to strengthen banking sector oversight.

The Government has announced that it will generate a deposit protection scheme, and will strengthen banker accountability.

This is through a new deposit protection regime, and in work to strengthen accountability for banks’ actions.

The Minister comments:

Now is the right time to check we have the tools to make sure banks meet their obligations to New Zealanders, and the powers to enforce them.” The Government is also making sure New Zealand follows internationalcbest practice for promoting public confidence in our banking system,including on the issue of depositor protection.”

The Review of the Reserve Bank Act was agreed in the Coalition Agreement between Labour and New Zealand First. The Coalition Government has already delivered on Phase 1 of the review, by updating New Zealand’s monetary policy settings to require the Reserve Bank to focus on employment outcomes as well as price stability.

You get a sense of what Phase 2 of this review will do from Treasury here.

The Government is proposing a limit between $30,000 and $50,000 for the deposit protection regime. This would cover 90% of individual banks in New Zealand, which is similar to international schemes.

The need for this in New Zealand as been considered since at least 2005.

Now, I’m sure the moral hazard of intervention of any kind following a bank collapse is not lost on the New Zealand government after the South Canterbury Finance issue. I would urge all of you to read Billion Dollar Bonfire: How Allan Hubbard and the Government Destroyed South Canterbury Finance”. It will make you sick.

The World Bank has already discussed this moral hazard (intervening and making things worse either then or later for others) quandary at length.

But does anyone’s memory extend sufficiently far back to the bailout of the BNZ? From memory that was a total surprise to an incoming government, and led to the privatization of what had been the bedrock of banking for this country. When banks go down they really do need governments to step in, and the unnevenness of government response to New Zealand banking crises is recounted here.

We now have plenty of tiny banking institutions who would look pretty frail in a decent rural farm price downgrade. And need it be emphasized, we have a really poor savings record as it is as a country, and we need all our banks to stay safe because overall we are up to our necks in mortgage debt. As a country and as a society we are incredibly vulnerable to banks – Australian banks.

Since we are completely dominated by Australian banks overall, it would be wise of us to align ourselves with the Australian banking oversight institutional framework.

This consists firstly of the Australian Prudential Regulation Authority (APRA). Established by the Australian Prudential Regulation Authority Act 1998, APRA is responsible for prudential regulation and supervision of authorised deposit-taking institutions (ADIs) as well as life and general insurance companies (including reinsurers and friendly societies) and the superannuation (retirement savings) industry (other than self-managed superannuation funds).

Then there’s the Australian Securities and Investments Commission (ASIC). Established by the Australian Securities and Investments Commission Act 2001, ASIC is the corporate, markets and financial services regulator, responsible for market conduct and investor protection.

Then there’s the big daddy, the Reserve Bank of Australia (RBA). Established by the RBA Act, the RBA is responsible for monetary policy, overseeing financial system stability and the payments system.

With the formation of Kiwibank to give just a little competition to the Aussie Big Four, we have glimpse of how powerful the income from a bank being recycled within New Zealand can be. But all this time I think it was us and Israel among the OECD that didn’t have a savings safety net from bank failure (someone correct me).

The first great political timing bit is ensuring that our regulators really can hold banks and their executives to account. Without saying it, these two moves have ANZ and John Key written all over it – simply through the luck of political timing, rather than from actual investigation in the formation of the reports.

The second great thing is that this is a regulatory move that is counter-cyclic: our economy is strong and there’s no sign that bad debts are rising fast. After a decade of property boom over most of our cities, we are swimming in mortgage debt to these banks. This is regulation put in when times ore good, knowing that government needs to be prepared when it (inevitably) goes bad. It shows that this government really can take on an entire industry with boots on.

Final decisions on the full details of a deposit protection regime and strengthened accountability standards will be announced in early 2020. More information is available here.

76 comments on “Regulating Bankers ”

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  1. Dennis Frank 1
    25 June 2019 at 8:38 am

    Kudos to the minister for the initiative. I expected it in the wake of the gfc, so the arrival a decade later is a big pleasant surprise! Credit to the coalition for agreeing to the necessity too. Sensible thinking all round.

    I trust the legislation will be well-written, and giving it a time-line of months for formulation allows everyone to digest it and consider the opportunity to add supplementary amendments if they seem required. Amy Adams has already reckoned publicly that it is insufficient, so the potential for bipartisan consensus is evident.

  2. Gosman 2
    25 June 2019 at 8:42 am

    I always thought the reserve ratio was meant to be the main method of protecting bank deposits. Does this mean the reserve ratio can be relaxed as a result of this additional insurance?

    • dv 2.1
      25 June 2019 at 8:56 am

      Do your own research.

    • Ad 2.2
      25 June 2019 at 9:08 am

      ANZ were censured recently for calculating this so that they were deliberately under-supporting this ratio.

      I see us as protected mostly by the size and profitability of the Au banks.

      But we need our own sovereign controls.

      • Macro 2.2.1
        25 June 2019 at 9:15 am

        does this mean that if an individual depositor has more than $50k deposited – they would be safer to keep the extra under the mattress?

        If so I can see a whole bunch of cashed up Aucklanders just loving this.

        • aj 2.2.1.1
          25 June 2019 at 9:24 am

          Is it insurance per person, or insurance per account. For example I have several term deposits which are all seperate 'accounts'

          • Macro 2.2.1.1.1
            25 June 2019 at 9:29 am

            I've been looking at the details on the link Ad provided at the end. I think it relates to accounts, but am not sure.

            • alwyn 2.2.1.1.1.1
              25 June 2019 at 10:09 am

              "but not sure".

              That's all right. It was clear from the announcement that neither were Ardern or Robertson. They hadn't even thought through how much they proposed to cover. Will it be $30k or $50k for example?

              It is going to cost the home buyers, in total, a couple of billion dollars a year to pay for the levy that Robertson is going to charge. That is according to the KPMG partner interviewed on Morning Report. That is simply the increase to be expected in mortgage interest rates.

              One can see why Grant is so keen on the idea,having rubbished it in the past. He can see, now he is staring at the enormous deficit that Stephen Joyce correctly predicted, a quick, if rather dirty way, of getting another couple of billion a year into the Government coffers with a new tax.

              If Macro is correct, and it is each deposit the Government is offering to guarantee an amount that is equal to the total GDP of the country. The total GDP. The seem to be wanting to head down the path of Iceland, where the Government simply went broke in the GFC

              • aj …
                25 June 2019 at 10:41 am

                It did strike me that borrowers should not be paying for the insurance of savers. This will be most costly to home owners with large mortgages. They mostly won't have savings so Gen X and millennials will have a legitimate complaint that again they are supporting a group that will mostly comprise people with no mortgages i.e. boomers.

              • Ed1 …
                25 June 2019 at 12:41 pm

                It depends on what you mean by a guarantee, alwyn, but I suspect you are reading commitments into the announcement of a review that are not there. Certainly higher reserves helps a bank to remain solvent, but I had understood that the Reserve Bank will under certain circumstances lend money to assist individual banks through normal trading fluctuations – following the problems shortly after the Key government was elected, Bill English toured the world looking for additional finance to help the banks – forcing the admission that the then previous government had left New Zealand in a strong financial position. Sadly that strong position was weakened more than was needed for gfc issues by the nine years of National-led government.

                We now have the example of actions in Britain following problems there – they effectively purchased some banks, in a similar way to the government purchasing an insurance company here. As far as I am aware both ended up with shareholders taking some loss, at the expense of government funds. If a company or sector is "too big to fail" then I believe government should have the authority through legislation to require the company to issue additional shares at whatever price the market is prepared to pay to ensure that the company is able to meet financial commitments, including protection of deposits and payment of existing insurance commitments. If the amount required means that the government ends up owning a majority of the company then so be it. The standard formula currently used for minimum reserves should not be seen as a guarantee, but a minimum level which banks should exceed if their business requires greater reserves to meet reasonable prudence.

                • Nic the NZer …
                  25 June 2019 at 7:42 pm

                  "but I had understood that the Reserve Bank will under certain circumstances lend money to assist individual banks through normal trading fluctuations"

                  The Official Cash Rate is the interest rate at which the Reserve Bank is willing to lend settlement balances to commercial banks. As long as they are in decent standing they should always be able to borrow reserves to make immediate payments at the OCR rate (plus an additional penalty). Typically they will borrow between each other slightly cheaper however. You can see both the relevant interest rates on the RBNZ's OCR chart.

                • Ed1 …
                  25 June 2019 at 4:21 pm

                  The word "could" is important – it does not mean "will." We have an inefficient market for financing – a smaller number of banks than we used to have, fewer of them New Zealand owned; few finance companies (and most of them bank-owned), and compared with years ago, no State Advances Corporation, no investment requirement for insurance companies (at one time they had to hold 50% of assets in government stock or mortgages), no government owned insurance company, and less funding available from solicitors trust accounts and trustee companies on behalf of estates under management. I suspect that in an efficient market, margins would be lower even after the cost of a higher level of guarantee for deposits. For bank apologists to seek to retain the current high level of bank profits indefinitely is a sad commentary on them – if shareholders are to expect high returns they need to also accept a higher level of risk when it goes wrong.

                  • Pat …
                    25 June 2019 at 4:46 pm

                    Indeed.

                    The interviewee stated "could" and "may" ad nauseam and unsurprisingly sidestepped attempting to explain why Australia with a more generous deposit guarantee scheme have a better differential between deposit and mortgage rates than we currently enjoy….and even then he conflated the deposit guarantee AND the increased capital requirements (as yet not passed, but they need to be) to arrive at his arbitrary 0.6 to 0.8 points on a mortgage….its blatant lobbying and fear mongering neatly packaged in vague terms

                    • alwyn …
                      25 June 2019 at 6:48 pm

                      It wasn't 0.6 to 0.8 points by the way. Nobody would even notice that as a point is 1/100 of a percent. It was actually 60 or 80 points.

                      Mind you he was fairly difficult to hear.

                    • Pat …
                      25 June 2019 at 6:51 pm

                      0.6 to 0.8 of a percentage point as you well understand

                    • alwyn …
                      25 June 2019 at 9:01 pm

                      @Pat.

                      People working in the field don't usually talk about changes as being percentages as you probably ought to know.

                      It is far too subject to confusion. For example is a "1% increase from 5%", an new value of 6%, as you seem to be using, or is it 5.05%?

                      To avoid confusion they use a term basis points so there is no confusion. here is no possible confusion when you call an increase as being, starting from the same 5% an increase of 100 basis points. That is unambiguously 6%. In the same way a rise of 5 basis points would be an increase to 5.05%.

                    • Pat …
                      25 June 2019 at 9:23 pm

                      if you wish to divert from the substance and argue semantics you may note i didnt use the term 'basis' point.

                • Nic the NZer …
                  25 June 2019 at 7:47 pm

                  Trust Grant Robertson to incur political flack for an idea which could be implemented without any. Of course the banks will now be able to blame the government for many interest rate hikes they might on charge. Since the RBNZ is the only institution able to issue the funds required to implement a bailout anyway it could alternatively be funded in the same way the SCF bailout was, when needed.

                  • Pat …
                    25 June 2019 at 7:58 pm

                    The Aussie banks are in an undeclared war on the RBNZ and I doubt Robertson's announcement has altered their tactics in any way….they were already threatening mortgage hikes/ deposit rate cuts re the proposed capital requirements….good luck trying that cartel behaviour for long, bankers being what they have become

                    • Nic the NZer …
                      25 June 2019 at 8:08 pm

                      Yes, and Robertson just said we will officially take responsibility for the deposit insurance cut in that (probably plus anything else they want to throw in). Its boneheaded because he could have avoided that easily enough.

                  • Pat …
                    25 June 2019 at 8:21 pm

                    Shit…when did he say that,? last I heard they hadnt decided on funding…though Ive just seen that hes undermining the increased Capital requirements.

                    A bank deposit protection scheme may help defuse the battle between the Reserve Bank and the country's biggest trading banks over how much extra capital they should have to hold on their balance sheets, Finance Minister Grant Robertson indicated today.

                    "There is "clearly an interaction between what happens between deposit insurance and what the bank does with its capital requirements," Robertson told journalists after announcing several in-principle decisions about the future regulation of the banking system, including a deposit protection scheme for deposits of up $50,000 in any one bank account"

                    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12243499

                    • Nic the NZer …
                      25 June 2019 at 8:32 pm

                      Sounds like he is opaquely proposing charging for deposit insurance in exchange for lowering capital requirements. Your right though i should wait for him to shoot his political foot off before drawing attention to it.

              • Shadrach …
                25 June 2019 at 8:06 pm

                Neither Ardern nor Robertson have a clue about how to manage the economy. The tragedy of this is that the people they claim to represent are the ones who are going to really suffer when the proverbial hits the fan.

              • Nic the NZer …
                26 June 2019 at 8:25 am

                "The seem to be wanting to head down the path of Iceland, where the Government simply went broke in the GFC"

                You do realize this has had almost no long term negative consequences for Iceland don't you? It did have some pretty serious consequences for some of the Icelandic Bankers prosecuted off the back of this (and as a result of the fraud which they were engaged in) but surely the actual consequences are more important than the specific scare words used?

                The consequences of going broke (and that term clearly doesn't mean what you think it means when applied to a country like Iceland or to its economy) appear to be irrelevant.

                • alwyn …
                  26 June 2019 at 9:20 am

                  I'm not sure that the people of Iceland would agree with you.

                  Unless, of course your definition of long term is very very long indeed.

                  Have a look at the unemployment figures for example. From a low of about 2.3% to around 7.6%. It's come back below 3% now but for a number of years it was very high wasn't it?

                  https://www.ceicdata.com/en/indicator/iceland/unemployment-rate

                  Click on the MAX item above the graph and you will see the full period from 2003 to 2018

                  • Pat …
                    26 June 2019 at 9:50 am

                    Lol….whereas NZ only peaked at 6.7 % (very high isnt it…pmsl) and then reduced to 4% in the same period…..

                  • Nic the NZer …
                    26 June 2019 at 3:19 pm

                    Your suggesting the government of Iceland can pick its unemployment rate? I have completely underestimated your economic insight.

                    So we can all learn at the masters feet can you please explain what effects to the unemployment rate are caused by the government going broke?

        • Kevin 2.2.1.2
          25 June 2019 at 10:39 am

          Why would you keep $50k in the bank anyway? The returns are so small you would be better off doing something productive with it.

          • aj 2.2.1.2.1
            25 June 2019 at 10:44 am

            If you are 20 or 30, yes. If you are over 60 or 70, no. The risk profiles are completely different. You can't recover from a bad investment decision when you are no longer earning income.

      • Blazer 2.2.2
        25 June 2019 at 10:06 am

        I venture if you really drilled down to who the beneficial controlling shareholders of these aussie banks are,you would find Wall St and the'City',the usual vampires of finance.

        • Phil 2.2.2.1
          25 June 2019 at 12:20 pm

          Nope. It's actually pretty rare for banks to hold minority-stake interests in other banks. That's because the amount of capital a bank is required to hold against a listed/traded share is significantly higher than the amount of capital you have to hold against, say, a residential mortgage or corporate bond – it's far more cost effective to make a stable value loan than it is to buy a volatile share.

          The vast majority of shares in the Aussie banks are held by private individuals, various types of investment/superannuation funds (which, in turn, are investing on behalf of individuals) and other corporate entities.

          • Blazer 2.2.2.1.1
            25 June 2019 at 12:33 pm

            Not so volatile in the last 10 years.

            Super profitable and they pay fat dividends.

            These are investment banks I'm talking about ,that have bucketloads of capital available at near zero interest rates,and of course there are all manner of derivative products they can conjure up from head shares.

            As for capital requirements…as if !

  3. Blazer 3
    25 June 2019 at 9:28 am

    The BNZ bailout rescued that shining Knight ,Humphrey Michael Fay,who had wheedled a 30% share in the BNZ.

    Recall his…'it's my fucking bank' comment,and it soon became evident that it was over exposed to his commercial entities FR and listed Cap Mkts in breach of bank guidelines.

    The gummint (as usual)pumped it back up and readied it for sale to NAB.

    The creativity with good bank/bad bank separation is similar to what basket case Deutsch Bank is implementing right now.

    'Profit smoothing'another euphemistic creation all over seen by Lindsay Pyne which came back to haunt him re directorships later in his career.

    This insurance is well overdue as is an inquiry into NZ banking practice.

    The GFC highlighted the need to regulate and hold banks to account,regardless of their protestations and threats.

    • RedLogix 3.1
      25 June 2019 at 9:54 am

      The gummint (as usual)pumped it back up and readied it for sale to NAB.

      And I have a first hand account from a person who was on the Board of NAB at the time. Their initial reaction was one of deep suspicion at the terms, they didn't believe they could possibly be that good. They damn nearly turned it down, but one member reckoned those dumbnut kiwis really were that stupid, so they dug a bit deeper.

      They could barely believe their luck and it turned out the single best deal they ever made.

      • Blazer 3.1.1
        25 June 2019 at 10:04 am

        Always a bargain when the Govts selling…ask Gibbs,Fay,Richwhite,Hart..NZ's very own oligarchs compliments of cheap public assets.(theft)

      • Dennis Frank 3.1.2
        25 June 2019 at 10:08 am

        devil Gosh, why aren't I surprised. Recalling as a teenager musing over the `thick as pigshit' average kiwi males applied to each other in those days, deciding that it worked as a general rule. Tempting to apply it to all mainstreamers nowadays, but not good praxis to do so. I discovered mainstreamers, if you appeal to their intelligence, are usually capable of responding in kind. It's actually the herding instinct that reduces them to sheep-like idiocy. Herding induces conformity by over-riding individual intelligence.

      • alwyn 3.1.3
        25 June 2019 at 10:19 am

        The best deal ever in dealing with the Government was Toll selling the rail and ferry operations in New Zealand to that old fool Cullen for $690 million. It has been an enormous black hole into which the poor old taxpayer has had to pour money ever since.

        Now that was a truly remarkable deal. Unfortunately not for the taxpayer of course.

        • Psycho Milt 3.1.3.1
          25 June 2019 at 10:29 am

          It would have been a lot better if he'd just nationalised it and paid Toll whatever composition the government deemed appropriate, but apparently that kind of thing is frowned upon these days. I blame the stupid fucks who privatised it in the first place.

        • Blazer 3.1.3.2
          25 June 2019 at 11:14 am

          Fay/Richwhite got an even better deal.

          Commissioned by the Govt to find a buyer,they erected a 'Chinese Wall' and bought it themselves for circa $300plus million,AFTER the Govt had spent about that much,getting it ready for sale.

          Years of asset stripping,insider trading charges an absolute moneymaker for the chosen few.

          Shipley's…believe it or…not!

          • Muttonbird 3.1.3.2.1
            25 June 2019 at 11:22 am

            Yep. Keys is the same. Watch him fall due to insider deals being exposed. He engineered the sale of his beach house to be paid for by the ANZ, ffs!

        • Dukeofurl 3.1.3.3
          25 June 2019 at 11:22 am

          Its only the depreciation that makes the railways 'unprofitable' in the commercial sense.( Operational expenditure matches income) It includes of course the Cook Straight Ferries, so is a vital part of infrastructure

          Roads arent depreciated , so arent a cost for trucking companies who have their means of delivery on the tax payers account.

          Guess who has been the biggest 'beneficiary' of the Roads of National significance – a $10 bill program

          • KJT 3.1.3.3.1
            25 June 2019 at 4:17 pm

            If roads were costed like ports, with opportunity costs of land and depreciation, and full user pays, factored in, most long haul trucks couldn't compete with rail or shipping.

        • KJT 3.1.3.4
          25 June 2019 at 11:25 am

          Another right winger unable to comprehend that the cost of having a service, rail, is much less than the cost of not having it!

          If you apply the same lack of logic to roads, schools, hospitals and courts.

        • Dukeofurl 3.1.3.5
          25 June 2019 at 11:25 am

          Who was the government who did an even better deal for Chorus.

          lend them the money at low interest rates to build a $2 bill fibre network

          Buy 45% of Chorus for $950 mill, effectively a cash injection

          A lot more than the Rail network which includes significant land and assets

          • Blazer 3.1.3.5.1
            25 June 2019 at 11:33 am

            the Telecom deal tops that one!

            Kiwishare 10% -up step Fay/Richwhite and Alan Gibbs to take it….$50,000 each(100k total) as deposit on shares that were soon to be worth nearly half a BILLION.

            Shipley's..believe it..or not.

    • alwyn 3.2
      25 June 2019 at 10:14 am

      "This insurance is well overdue".

      Pray tell us Old Chap (or Chapess). Were you in favour of the deposit guarantee scheme we had that included South Canterbury Finance? The current proposal seems to be merely a variant on the scheme, and most of the people who contribute here seemed to be opposed to that.

      • Blazer 3.2.1
        25 June 2019 at 11:07 am

        SCF was a joke.

        Bailed out the mainland mafia with interest.

        Finance companies are not the same as the banks.

        The insurance exists for depositors in Australia.

        In NZ they have the OBR=a haircut for savers.

  4. Muttonbird 4
    25 June 2019 at 10:50 am

    Bernard Hickey puts the long sprigs on:

    The Reserve Bank's natural instinct is always to protect the reputation of the financial sector, and to maintain confidence in the stability of the system. That is embedded in its act. It is an inherent conflict of interest.

    How can you be tasked with rooting out wrongdoing in your sector when also being tasked with maintaining confidence?

    How indeed?

    https://i.stuff.co.nz/business/opinion-analysis/113748149/a-proper-banking-and-insurance-inquiry-please

    • Dennis Frank 4.1
      25 June 2019 at 11:05 am

      Answer: apply both/and logic. Give a manager responsibility for one task, plus operational and decision-making autonomy. Likewise, another for the second task. Create a governance structure in which both reports are considered by governor and board, and made public along with the outcome.

      Governor & board then have the option to prioritise either according to circumstance. Tasked with producing a synthesis, they'd be able to focus on the highest operational priority at the time. As long as stakeholders are able to peruse and comprehend their judgment and rationale, ought to keep everyone happy…

      • Muttonbird 4.1.1
        25 June 2019 at 11:12 am

        Lol. Ever the centrist, Dennis.

        • Dennis Frank 4.1.1.1
          25 June 2019 at 11:20 am

          Variant of the traditional carrot & stick approach to regulating, in the guise of creativity. Markets work via risk & reward, fear & greed. Use the structural binaries then! Don’t be dismayed by the difference.

          Applied holism is the most powerful thinking there is. It transcends binaries whenever you use it, gets stakeholders into the big picture by shifting their perspective…

  5. greywarshark 5
    25 June 2019 at 11:33 am

    'We now have plenty of tiny banking institutions who would look pretty frail in a decent rural farm price downgrade. And need it be emphasized, we have a really poor savings record as it is as a country, and we need all our banks to stay safe because overall we are up to our necks in mortgage debt. As a country and as a society we are incredibly vulnerable to banks – Australian banks.'

    Edit
    So true but I think that the above reflects one regular theme heard that sounds as if finding fault with people’s handling of finance; that we have a really poor savings record. People are actually advised not to leave money in ordinary bank savings accounts which pay interest at the same present low rate of inflation which then gets taxed at 17.5% at least or 39% I think as the higher rate. Hardly encouraging to leave money in a bank a/c. And of course there is the savings paradox; people saving are not spending, and now we have so little home-grown businesses in NZ, actually consumers and retail spending is a major business sector itself, replacing production – manufacturing which should be large and providing a good flow of wages to back the spending, instead of it being hitched to credit cards.

    Putting it into term deposit is better, but that gets taxed also. Shares – people do buy in but we had such amazing chicanery happen in the late 20th century as the fast boys got into the free market good, with low regulation and government sell ups heating up everything. So go to the bricks and mortar where with land and improvements, you have something to show for your money-making efforts.

    Unfortunately in the low-regulated, export-crazed and vitalised economic system, buying land and housing brought more overseas investment money to this country, so demand and house prices went up. Wages were pushed down, jobs were lost, government assistance was put down, inflation was held low, interest was kept low, and business had a fairly level playing field which was good in theory but big business decided they could extract money from the economy which was built on overseas borrowing at good rates, cheaper than what would have to be paid for people's savings. Big business tilted the level playing field so that it benefited them, and overall the NZ economy gives a perception of strength but is very sensitive, easily damaged by overseas events and drying up of overseas loan sources or raising of interest rates. It seems to me that our real standard of financial strength and resilience is poor.

    Terry Pratchett had some fun with banks in his book called Making Money. This is the Wikipedia stub about it It lampoons all the common themes and cliches we have about banks.

    Royal Bank of Ankh-Morpork

    Deliberately designed as a temple to money, this opulent establishment serves as Ankh-Morpork’s principal finance house. At the onset of Making Money, it is in trouble. It falls to Moist von Lipwig to realise just exactly how deeply in trouble it is.

    Oh, and the fornication in the vaults is truly breath-takingly spectacular. This almost overshadows the Thing In The Cellar, which is lovingly tended by Hubert Turvy and an Igor.

    It is – reluctantly on the part of its Chief Cashier – in the vanguard of the new Paper Money idea. The Bank is situated on Upper Broad Way.

    Current Staff:-

    Mr Fusspot – Chairman of the Bank
    Mavolio Bent – Chief Cashier
    Miss Drapes – Most Senior clerk
    Robert Spittle – Senior clerk
    Hammersmith Coot – Junior clerk
    Hubert Turvy – Economist
    Igor – Assistant to Hubert
    Aimsbury – Head Chef
    Peggy Aimsbury – Cook

    • Blazer 5.1
      25 June 2019 at 11:36 am

      so Hammersmith Coot has moved on from the..ANZ. 😉

    • Phil 5.2
      25 June 2019 at 12:35 pm

      Terry Pratchett had some fun with banks in his book called Making Money… the Thing In The Cellar, which is lovingly tended by Hubert Turvy and an Igor.

      Fun fact: The 'thing in the cellar' is called, in the book, a Glooper. It's a machine that uses water and pipes to simulate the flow of money around the Ankh-Morepork economy.

      It's inspired by the MONIAC, a machine created by NZ economist Bill Phillips to do exactly the same for real economies. You can see a working model in operation in the Reserve Bank museum in Wellington. I'm pretty certain it's the only working model on earth.

      • Ed1 5.2.1
        25 June 2019 at 12:53 pm

        Just such models can now be created to represent economies or individual businesses, using distributions for cash flows and complex interactions between inputs and outputs – it is the assumptions that are the really hard part, but stress testing of a bank's financial position is probably part of normal management. Such models can inform, but cannot provide guarantees.

      • greywarshark 5.2.2
        25 June 2019 at 5:44 pm

        Thanks for that Phil that sort of thing intrigues me. I've read about the Phillips machine. That's the sort of theing that makes Terry P so interesting – there are so many real connections with the world and he wove them in. RIP. Great guy.

        I remember being at Massey and they had a structure with a vertical weighted line hanging from the ceiling pointing at 12 noon say, and you look at the clock face on the floor and feel you understand that the world is turning under your feet and will finally get back to square up with the 12. It's fascinating and okay provided it doesn't get wobbly as in an earthquake it is a different feeling.

  6. greywarshark 6
    25 June 2019 at 12:10 pm

    Can't say I agree Blazer – He is a banker at a high level and has managed difficult situations in a unreproachable way from what others who worked for him have said. And he isn't Mavolio Bent, perhaps more Miss Drapes style. And Key, Chairman? Is he Mr Fusspot; I think that title wouldn't suit if we knew all the facts. He is more M.Bent I think. But who would Igor be I wonder?

    I think I have upset settings on this thread. I was trying to rearrange lines taking out double spacings and took out a ul in pointy brackets and my list shifted to the left. Sorry!

    • Dennis Frank 6.1
      25 June 2019 at 1:17 pm

      Shift left evident to me to, so presumably to all viewers. Who knew you're so powerful? I wouldn't have a clue how to do that. Restructuring the communal venue could be viewed as subversive behaviour, eh? wink

  7. McFlock 7
    25 June 2019 at 2:03 pm

    Seems to me that the moral hazard is avoidable if bank failures and bailouts were accompanied by prison terms for directors, managers, and commision-sellers of financial products for the bailed institution.

    Terms proportionate to the level of culpability and the severity of the bailout. A few weeks home D or even nothing if you report bank difficulties early, 20 years of you run a major institution into the ground.

  8. Adrian 8
    25 June 2019 at 3:43 pm

    Stuff headline just now : Key ( and others ) Could Face Jail"". Oh God, yes please.

    • Dukeofurl 8.1
      25 June 2019 at 3:57 pm

      Thats click bait.

      They were already found wanting in the numbers for the capital reserves, and wasnt it ANZ who recruited a top exec who had worked for a corrupt bank branch in Malaysia and whos approval was with held by the RBNZ.

      What more do they have to do wrong so its 'golden parachute time' ?

      The SFO should be looking into the valuation for the 'house that Hisco bought'…thats Nigerian way of doing business. Did the bank not see the huge drop in valuation and get a second opinion.

      • Muttonbird 8.1.1
        25 June 2019 at 8:12 pm

        I think it was the BNZ who was going to recruit the woman who worked for the ANZ outfit in Malaysia. She was the CFO when the then PM funnelled billions into his own accounts.

        😂

        That's the level ANZ is at so no wonder John Keys fits right in.

    • Muttonbird 8.2
      25 June 2019 at 8:41 pm

      ANZ's directors, including former prime minister Sir John Key, could face criminal and civil penalties if they are found to have made false or misleading statements to the Reserve Bank.

      https://i.stuff.co.nz/business/113761989/criminal-penalties-possible-if-anz-directors-found-to-have-misled

      So hoping this will happen!

      Amazing how these Nats get themselves into trouble like this.

      Zero morals and ethics???

  9. WeTheBleeple 9
    25 June 2019 at 4:25 pm

    I can't recall which thread I pointed out a new user dropping links with viruses attached but it may be why this one is all messed up. At the bottom of the page (here, now) I have the comments/replies/opinions and the feed/party/scoop/media tabs which do not appear at the base of any other threads.

    • Incognito 9.1
      25 June 2019 at 5:30 pm

      I played around with the text in italics at the bottom of comment #5 and that seem to have done the trick. So, no nasty viruses, it seems 😉

      • WeTheBleeple 9.1.1
        25 June 2019 at 5:46 pm

        Much better! Glad it wasn't an issue. Those links had ESET and AVG whinging.

        GWS – you broke te internets!

        • Incognito 9.1.1.1
          25 June 2019 at 6:13 pm

          I did not get any AV warnings with those links except for accepting cookies, which I declined. In other words, they looked ok to me.

          Better safe to be sorry though. You always click on links at your own risk. Just because it appears on TS doesn’t mean it is 100% safe!

          The site uses a SPAM filter but I don’t know whether WP also has an inbuilt AV function. Lynn will know 😉

          • WeTheBleeple 9.1.1.1.1
            25 June 2019 at 6:55 pm

            Maybe it was my end with something else open that was dodgy. Have to check what I was working on. Glad the sites OK – with the links and the thread going wonky it was worth querying. Thanks for checking.

  10. RedBaronCV 10
    25 June 2019 at 6:05 pm

    would be nice for a % of profits every year to go into the reserves over and above any other calculation to act as an extra buffer. if it got to be too much maybe us customers could have a bit of it back

  11. Nic the NZer 11
    25 June 2019 at 7:56 pm

    The moral hazard arguments are mostly nonsense, unless… The government doesn't follow it's bank bailout by replacing all the bank exec involved and getting the relevant prosecutions initiated against responsible officers. On the other hand if you bail out the bank and leave the same execs who caused the failure in charge then there is massive moral hazard, and the banks clients suffer.

    In general however this kind of deposit insurance policy was first instituted following the great depression to avoid future bank runs.

    • Phil 11.1
      27 June 2019 at 1:14 pm

      if you bail out the bank and leave the same execs who caused the failure in charge then there is massive moral hazard, and the banks clients suffer.

      This is why I like OBR as part of a deposit insurance regime. It's the ideal mechanism for shutting down a failed bank and reopening it with statutory management in charge.

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