17th July, 2014
Murray inquiry sets stage for Australian bail-in law
The interim report of David Murray’s Financial System Inquiry, released 15 July, pushes the case for supposedly solving the problem of too-big-to-fail (TBTF) by implementing “bail-in”—the system which includes confiscating customer deposits to prop up failing banks, Cyprus-style.
Furthermore, Murray recommends the Abbott-Hockey government continue the process commenced under the Gillard-Rudd-Swan governments, of aligning Australia’s regulations with the Financial Stability Board’s (FSB) Key Attributes of Effective Resolution Regimes, the financial measures to which G20 member countries are committed to comply, including bail-in.
Murray’s interim report perpetuates the fraud that bail-in is a solution to TBTF banks, even though bail-in does nothing to reduce the size of the banks such that if they fail they won’t damage the rest of the economy. Bail-in is presented as a way to ensure governments won’t need to bail out a failing bank, because the cost will be borne by the bank’s creditors instead.
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