Is my term deposit safe? I am very concerned the banks will collapse.
September 18, 2008 by Josie Kay
Q,. Josie, we have the proceeds of our recent house sale in a term deposit with a major Australian bank. How concerned should we be in regards to it’s safety in light of the current financial problems worldwide?
The amount concerned is in the vicinity of $250,000, and without this, to buy another house, we would be struggling.
Thanks for your time.
Josie’s answer: I can certainly understand your concern because we are in uncharted territory as we have not experienced this type of crisis in our financial system since the Great Depression.
Very scary stuff. There is a lot of finger pointing at the moment and over and over again I am hearing that it is due to lack of regulation in the US financial system. We are also seeing cracks in the UK’s financial system.
Several experts have stated that our banks are weathering the storm quite well and that their balance sheets are much stronger than those that have already collapsed (such as Bear Stearns, Fannie Mae, Freddie Mac). The following comments published yesterday by our Reserve Bank Governor, Glenn Stevens, might help to reassure you.
“The capital position of Australian banks has never been a problem, despite the recent turmoil in the international markets. There has never been any doubt about the solvency of any Australian bank“. The very sound position of the local banks was a major source of strength for the Australian financial system during this period.”.
In other words, he thinks that even though they are exposed to some risk, that they have enough capital (assets to back them up) to take some blows. The problem you have is ‘where would you put your money if it wasn’t in one of our major banks?
I am assuming you are referring to CBA, ANZ, Westpac or NAB. You just can’t put $250,000 under the bed! If you are concerned, perhaps diversification of financial institutions might be the way to go e.g. you could put your money across two or three of the big banks. That way, if one gets into trouble at least not all is lost (although I believe the risk is low that one of our majors will sink - but of course not impossible!).
I personally would feel comfortable if my money was invested in a term deposit within a major Australian bank. However, no one predicted the Great Depression and we don’t know what is around the corner. Perhaps you should ring your bank and simply ask them - ‘how safe is my money?’.
Don’t hesitate to do this or worry that you might sound silly. It is your hard earned money which has taken you a lifetime to accumulate and YOU are the client.
Cheers and I wish you all the very best for the future. Josie Kay
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i did ask my bank how safe is my money, he told me as safe as it could be , he said appra gives them a ratting 1 2 or 3 stars .whoope i asked is it goverment guaranteed NO …….my advise is for what it is worth dont ask for advise , because they would know no more than you and a good chance a little less,use that old TRIED and proven GUT FEELING. do , you really think they will tell you there about to go broke …….good luck i have a terrible feeling we are going to need it.