A motivational speaker with a Facebook following of more than 20,000 people has claimed an Australian law introduced in 2018 allows the federal government to “drain your bank account” of deposits over $250,000 in the event of a financial crisis.
It’s not the first time such claims have been made. A similar argument was made by a minor party senator who proposed a law change in 2020 to stop “failed banks taking our money”. However a parliamentary committee which examined the matter found there are already legal protections for bank deposits and the change was unnecessary. Experts in finance law also told AAP FactCheck the claim is “confused”, “extreme” and a strained reading of the legislation.
The claim is made by Espen Hjalmby in a video on his Facebook account on February 24. In the video (2min 30sec mark) he tells his followers to Google “Bail in law 2018 Australia”. Entering that phrase into a Google search brings up as the first result a link to a web page of fringe political organisation the Australian Citizens Party. The web page refers to a piece of legislation, the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 that became law in March 2018.
At the 2min 55sec mark, Hjalmby says in reference to federal parliament: “They snuck in a new law, snuck it in the back door with some of the people voting it in awake and voting it in, the rest were asleep … a law that says the government has a legal right to drain your bank account of anything above $250,000.”
Hjalmby’s claim mirrors language used by the Australian Citizens Party (formerly called the Citizens Electoral Council) and One Nation senator Malcolm Roberts – the politician who sought the 2020 amendment – in arguments that the 2018 legislation allows for failing banks to take money from deposit accounts to maintain stability in a financial crisis.
The basis for Hjalmby’s claim that the law was “snuck in” while some parliamentarians were awake and others asleep is not clear. The final reading and vote on the legislation occurred around lunch time, at 12.30pm on February 14, 2018.
As explained in this ABC News report, the “bail-in” referred to by Hjalmby is the opposite of a government bail-out of banks during a financial crisis. Where a bail-out refers to the government’s guaranteeing of Australians’ bank deposits, a bail-in refers to a scenario in which the bank shores up its financial survival by taking deposits and exchanging them for shares.
In February 2020, Senator Roberts introduced the Banking Amendment (Deposits) Bill 2020 into parliament. The bill aimed to “stop banks in financial trouble from stealing our savings”, according to his media release, by amending the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017. But a Senate committee inquiry into Senator Roberts’ bill, after taking advice from the federal Treasury and regulator the Australian Prudential Regulation Authority, rejected concerns that deposit accounts of bank customers could be subjected to any kind of bail-in or write-off in a financial crisis.
In its final view the committee stated: “The committee concurs with the advice of the Treasury and APRA that the explicit protection of deposits in the Banking Act – the objects clause, priority repayment, and the Financial Claims Scheme – is inconsistent with a concern deposit accounts could be subject to any kind of conversion, write-off or bail-in.”
Legal experts told AAP FactCheck there is no truth to Hjalmby’s claim.
Associate Professor Andrew Godwin, from the University of Melbourne, said the legislation empowered APRA to direct certain types of “hybrid securities” to be compulsorily converted into shares in the bank, and that the argument was about whether that could extend to bank deposits.
“In my view this is a strained interpretation as bank deposits up to $250,000 are guaranteed under the deposit guarantee scheme that the government introduced during the Global Financial Crisis,” he said in an email.
Dr Godwin said the target of the bail-in power was hybrid securities, such as contingent convertible bonds, that are issued by banks to investors in the knowledge that they are subject to bail-in.
“Those who argue that the legislation is ambiguous claim that the reference to ‘hybrid securities and other instruments’ could capture bank deposits. Although there may be legitimate arguments as to the technical meaning of ‘instruments’, I think it is far-fetched to interpret the legislation in this way,” he said.
UNSW Scientia Professor Ross Philip Buckley, from the Faculty of Law & Justice, told AAP FactCheck the Australian government could not order the conversion of people’s bank deposits into shares.
“An extreme and strained reading of a phrase in the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 (Cth) could lead to that result but it is not a reading any Australian court would adopt,” he said in an email.
Associate Professor Will Bateman, a legal expert from ANU, said the claim had “no truth”.
“There is no truth in the statement of the social media influencer regarding the use of regulator powers to ‘bail-in’ deposit accounts at Australian banks,” Dr Bateman said in an email.
“Australia has a system of deposit insurance under which the government agrees to insure the contents of deposit accounts up to $250,000/customer/ADI in the unlikely event of a bank failure. That system is called the Financial Claims Scheme. The Australian banking regulator, APRA, is under a legal duty (s12, Banking Act 1959 (Cth) to protect depositors which would preclude the use of ‘bail in’ powers in respect of deposit accounts.”
Dr Bateman said Australia also has constitutional protections that prevent the government acquiring property, including deposit accounts without providing ‘just terms’, or compensation, under section 51 (xxxi) of the Constitution.
“Those protections prevent the situation described by the influencer from occurring in Australia,” he said.
The Verdict
The claims made by Hjalmby reflect similar claims made by One Nation senator Malcolm Roberts and in submissions by minor political group the Australian Citizens Party. A Senate committee investigated concerns that the 2018 legislation meant that bank deposits could be subjected to a “bail in” and concluded that existing laws protect deposits. Experts in financial law have also dismissed the claims, describing them as “confused” and an “extreme and strained” reading of legislation that no Australian court would adopt.
False – The claim is inaccurate.
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