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  1. #1

    Default facts about banks

    There was recently a post which said "deposits preferably in Kiwibank which is our only 100% safe bank at the moment".

    The only "safe" place to deposit money is Kiwibonds. Both the capital and the interest payments are unconditionally guaranteed by the NZ Government. Because the Govt doesn't need any money, they're not advertised, but I see small ads are appearing in papers reminding people about them.
    The next level of security is registered banks. For bondholders and depositors, these carry the least risk (note "least risk", not safe, or no risk) The banks are under the prudential supervision of the Reserve Bank - this means very strict rules about liquidity. Only these banks can call themselves banks. Kiwibank is one of those banks, but carries no extra security just because it's essentially owned by the NZ Govt. For instance Rabobank is on the face of it more secure than Kiwibank because it's owner is (as I understand it) a financially larger entity than the NZ Govt. It's extremely unlikely that the Reserve Bank/Govt would allow a registered bank to cease interest payments on deposits without stepping in to help. But there's no guarantee of that.

    The next level of security is the likes of building societies (the Reserve Bank/Securities Commission insist on them describing themselves as "not a registered bank" if they have bank in their name).

    The next level of security are bonds etc which have investment grade (BBB- or above) ratings. Then finance companies with investment grade ratings. There are only three of these - UDC, Marac, South Canterbury. The rest of fin cos are complete rubbish and you should get your money out while you can.

    Pip, pip!

    "When people are greedy, be fearful. When people are fearful be greedy" Warren Buffett.

  2. #2
    Join Date
    Apr 2008
    Posts
    2,086

    Default

    I agree re KiwiBonds. The only problems are the low interest rate and the brokerage you have to pay when you buy and sell.

    As for the banks, I would tend to put KiwiBank and Rabobank slightly ahead of the others. Deposits with KiwiBank are guaranteed by NZ Post, which is 100% owned by the NZ government. And, as you say, deposits with 'Raboplus' are guaranted by a giant European bank, which says it has minimal exposure to toxic US debt (they think).

    As for BNZ, ANZ National, Westpac, & ASB, they're all Aussie-owned and they'e all potentially exposed. I thought about spreading money between all of them, but if one goes, they'll all go. Seems very unlikely that the Australian and NZ governments would allow one of them to go, if it ever came to that.

    Some of the building societies are probably safer than a bank (eg, Southland).

    I agree that there are good bonds out there, with good interest rates. The safest would probably be those issued by companies outside the finance sector.

  3. #3

    Default kiwibank and NZ Post

    Just for the record

    New Zealand Post Guarantee

    New Zealand Post Limited, our parent company, has guaranteed our payment obligations, including any payment obligation in respect of any deposit made with us. The guarantee does not apply to payment obligations where the terms of the obligation expressly provide in writing that the obligation will not have the benefit of the guarantee. This means that the guarantee does not apply to unsecured, subordinated bonds issued by us. The guarantee is not secured and its amount is not limited. The guarantee is unconditional and is terminable by New Zealand Post Limited upon three months’ notice to us. Any such termination does not affect any existing payment obligations owed under the guarantee at the termination date.

    My understanding is that Kiwi Bonds can be bought directly from the NZDMO with no brokerage. Paying 7.5% six months.

    For a capital sum that must be preserved
    Best invest one third kiwibonds
    one third registered bank inc kiwibank, rabobank and one other
    one third udc, marac and sth canty
    ???

    "It's only when the financial tide goes out every 15 years or so do you see who's actually wearing clothes"

  4. #4
    Join Date
    Apr 2008
    Posts
    2,086

    Default

    Thanks for info re KiwiBonds. That's a reasonable interest for 6 months.

    I waas going to go one third KiwiBank, one third Rabobank, and one third ANZ National. But now I'm going to add KiwiBonds, and invest one quarter in each.

  5. #5
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,297

    Default

    I opened 2 online call accounts the other day. One with Kiwibank and the other with RaboPlus.

    I haven't gotten around to putting any real money in them yet but I might well do.

    I currently have my money with ANZ. If they look shaky at all, I'll just shift it over. Nice to have the option. Doubt I'll really need it tho.

    David

  6. #6
    Join Date
    Apr 2008
    Posts
    2,086

    Default

    You'll have to get used to that funny calculator device that you get from RaboBank. It's a bit difficult to operate when the head isn't quite there.


 

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