27 votes

The Cypriot model is catching on

Canadian Deposits As Safe As Cypriot Deposits

Rest easy, Canadians, for your bank accounts are going to be made as safe as those bank accounts in Cyprus. Just take a look at the Canadian government's budget plan for 2013, particularly pages 144 and 145 of Economic Action Plan 2013. There the Canadian government promises to use Canadian deposits to save "systematicaly important" banks (emphasis ours).

The Government proposes to implement a "bail-in" regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

Those bank liabilities that will be allowed to be converted into regulatory capital? Those include customer accounts.

Apparently bailing "out" banks with tax money is too 2012. Now bail "ins" with customer money are all the rage. When a bank deemed "systematically important" finds itself in trouble, taxpayers won't be on the hook to provide the funds to rescue the bank from its bad decisions. Instead the bank will get to look inward, toward its own customers and the funds in their accounts. The Cypriot model is catching on.

http://dollarvigilante.com/blog/2013/4/1/canadian-deposits-a...

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Heads up

As a Canuck I appreciate the post!

Oh crap eh

Thankfully I took all my money out of RBC, the whores.

It caught on here in December of last year:

http://silverdoctors.com/fdic-bank-of-england-create-resolut...

http://www.fdic.gov/about/srac/2012/gsifi.pdf

"When the power of love overcomes the love of power, the world will know Peace." - Jimi Hendrix

letter sent to Canadian prime minister

Dear Mr. Harper,
Exactly WHAT is the 2013 budget proposing to do with money in banks that belongs to the people of Canada? This sounds a little too much like Cyprus. Please inform electors of what is going on.

This is how It appears. The new law would make Cyprus-style bank account confiscation the law of the land for the entire EU (and Canada). When major banks fail they are going to bail them out by taking money that is in our bank accounts.

This is going to destroy faith in the banking system and make it more likely that we will see major bank failures all over the western world and Europe.

Banks can take extreme risks with their money and lose, but the banks will be saved at the expense of raiding our bank accounts.

This is an important issue. In simple terms, please explain what this bail-in means.

Canada Budget 2013 page 144-145

"Establishing a Risk Management Framework for Domestic Systemically
Important Banks Economic Action Plan 2013 will implement a
comprehensive risk management framework for Canada’s systemically
important banks.

The Government proposes to implement a bail - in regime for
systemically important banks.

This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital." (our savings accounts)

In theory this is a free market solution

But in practice no. The problem is in a real bankruptcy, the largest depositors and cronies of the bank will be alerted before the bank goes under and will pull all their money out. This will leave only the small depositors left to be crushed by the debt write down.

People just need to wake up and realize the risks associated with the banking system. Get your money out now! I realize many people have to do business with banks for direct deposit from work. If you do, work with a local bank or credit union that doesn't have trillions of dollars in derivatives exposure. You aren't making any money in your savings account anyways so just hide your cash and/or gold somewhere on your property and you will be far safer than in a bank vault.

peace + liberty = prosperity

Caution, R rated response

http://www.youtube.com/watch?v=oA6FHBCWAyY

“Any man who thinks he can be happy and prosperous by letting the government take care of him better take a closer look at the American Indian.” ― Henry Ford.

Wait a minute...

Working through this from a libertarian slant.... If a bank plays too many games and goes under, don't we want it to go under? And in that process, shouldn't all accounts be settled first? In other words:

Bank calls for bankruptcy.
Assets and transactions are frozen.
Bankruptcy managers call in all outstanding loans.
Managers disperse assets and revenue to creditors (depositors).
Managers allocate outstanding balance of revenue to outstanding creditors.
Some debtors are left wanting.
If balance is too negative, some assets get allocated to creditors get re-prioritized depending on the terms of their contracts.

I'm not clear on this but don't creditors stand in roughly the following order?

Secured deposits
Unsecured deposits
Contracted payments
Preferred shareholders
Shareholders

Can't this become a legal issue where contract law warrants lawsuits?

I think that is just about correct

I would propose that the bankrupt bank be responsible for transferring loans to another institution which would oversee them rather than call them in. This would likely be a much smaller shock to the system, and much less disruptive to individuals. Instead of recieving a notice that the bank wants my mortgage paid off immediately I'd get a letter saying my loan has been sold to competitor X, and my payments will be redirected to that location. My bank maybe will only be able to sell my mortgage at 80% of face value to another bank (or 0% If my credit and payment history is that bad) but that is the market value of that asset that my bank is holding. Either way I still owe the same amount at the same terms, just to a different entity. Once all the assets are liquidated then the creditors of the bank get paid in order of senority, and yes the depositors should be senior to all other creditors. This is how a bankruptcy should work in the favor of the individual depositor or mortgage holder in order to maintain a strong banking sector. Shareholders know they are taking a risk, if the bank fails and they lose their investment that is on them, but they knew that all along.

Josh Brueggen
Engineer
Entrepreneur
Gardener
Jack of all Trades
Precinct Commiteeman Precinct 5 Rock Island Co Illinois

Don't Cyprus Me Bro!

https://www.facebook.com/photo.php?fbid=169324243221740&set=o.486307821389136&type=1&theater

________________________________________

Those who expect to reap the blessings of freedom, must, like men, undergo the fatigue of supporting it. ~Thomas Paine

Had a thought

While I do not agree with the bailouts or bailins, Ive noticed that bailing a bank out with customers savings is a way to pay off debts with less valuable(older) money.

SteveMT's picture

Notice first that taking people's money is outright theft.

Whether the money is new or old is irrelevant when theft is involved.

I completely agree.

Its theft. Immoral. And wrong. Im just trying to fathom how europe overlooked the moral hazard of the cypriot bail-in. And yeah, circular logic is the only way Ive been able to justify it. It'd sound better if we added a dash of fluoride ;)