What happens when bank shuts down?

This is completely hypothetical and let's hope it will never happen.

What happens if a bank shuts down, you still have a home loan debt with them and you have money in the offset savings account?
- Are you still obliged to pay the loan with the same monthly arrangements?
- Are you required to pay the lump sum at once?
- Home loan agreement ceased and you dont have pay the loan back?
- Money in the offset account is also gone for good?

 

A lender would assign the debt to another entity, so that you become liable to that entity going forward.

Cash may be lost, but there is a limited guarantee backed by the banks.

 

I heard a rumor the other day in a share trading site chat room about a small cap Aussie Bank that it was time to sell very quickly as it's traveling on the slope of hope,,,

 

Is this a guarantee specific to individual banks or do you mean the government backed guarantee of deposits under 250k?

 

That would be great - we'd all want a banking collapse then!

Unfortunately, the banks loans to you are the banks assets that generate it income. These assets have value.

When a bank shuts down, liquidators etc will sell these assets (your loans) to other parties. I suspect they will squeeze the juice out and generate more income (higher interest).

Mechanics may play out differently, but it will all be variations of the above.

 

Bank, or lender in the finance sector?

Feb 1990
Rob Jolley, Victorian minister for finance guaranteed our money was safe in the Pyramid Building Society.(it folded).
There was a levy placed on the Victorian citizens to fix this.(was it ever removed?)
I only received 51c in the dollar from what I actually had.
I haven't trusted the government since, never will
At worst, consider your offset gone and the debt (if it has a good LVR) sold off to another lender
Actual banks have a government guarantee, but if the whole sector turned toes up............... gone

 

I meant the govt guarantee of $250k

 

A good reminder of what can happen in a real recession...

 

Not to forget the State Bank of South Australia and the State Bank of Victoria around the same time.

Yes, it was $100 per property per annum for three years.

 

Does this mean you only received 51% of your savings back? Was it in term deposits or ...? I'm thinking not offsets because they didn't exist then ... or did they?

 

So what this means is that you still have to repay the loan in full, but ALL your money (except for 250k) in offset account may be lost. Basically, one would have to start from 0 again!

This is clearly a hidden risk of using offset accounts, rather than just paying off the loan! Never really thought about this...

Is AMP an actual bank guaranteed by the government's 250k?

 

Your loan will never be written off in a banking collapse. Savings maybe but usually guaranteed via gov so don't go above the guarantee limit in offset account.

Worst off are the shareholders, lose the lot. Four bank shares I had went to zero. Swiss banks are still down 80% from 10 years ago before the GFC.

 

Yes that is correct.

There is a thread somewhere here where I looked up the lenders included and posted a link. I think even the smaller lenders were included - including AMP - but don't rely on hearsay, do your own research.

 

Seems a LONG TIME AGO

Yes, it took 3-4 years to receive 51% of my savings acc balance (toward my first home) back

So much for the Vic gov guaranteeing my money

I didn't end up buying my first place until 10 years later


(Typical though, structure of going insolvent/receivership, Government get paid first, then banks, then creditors, then ....................... )

 

try here:

Pages - List of Authorised Deposit-taking Institutions

Also:

https://www.moneysmart.gov.au/managing-your-money/banking

 

That's criminal.
I know a few banks and financial institutions went down at that time. There were a lot more stories going around of people's life savings being swallowed up in rorts and bankruptcies too. A lot of our community weren't even a twinkle and their parents probably not in Australia either.
Does the govt guarantee of 250K for banks still stand?

 

What about if you had 100k cash each in banks like ING and Rams? are these covered by the 250k government guarantee and would I get all my money back if they collapsed overnight?

 

Click on the links and find out.

 

So they're all covered now - not just the 'banks' and certainly not just the big 4.
But I thought I heard they were going to take the guarantee off? Not necessary anymore?