http://www.zerohedge.com/news/2013-04-04/ceo-italys-largest-bank-says-haircuts-uninsured-depositors-acceptable-should-become-
( Templating deposits - sounds good to the Ceo of Unicredit - cue the italian bank runs.... )
Submitted by Tyler Durden on 04/04/2013 12:59 -0400
http://www.zerohedge.com/news/2013-04-04/european-safe-haven-flows-drag-swiss-2y-rates-3-month-lows
Submitted by Tyler Durden on 04/04/2013 11:45 -0400
http://www.zerohedge.com/news/2013-04-04/97-spanish-social-security-pension-fund-domestic-bonds
Submitted by Tyler Durden on 04/04/2013 09:55 -0400
http://www.infowars.com/alert-all-of-the-money-in-your-bank-account-could-disappear-in-a-single-moment/
( Seized on stolen by cyber warfare - depositors money increasingly at risk.... )
Submitted by Tyler Durden on 04/03/2013 11:42 -0400
and.........
http://www.goldmoney.com/gold-research/alasdair-macleod/danger-in-bank-accounts.html?gmrefcode=gata
( you know where they are heading folks and its not Odessa , Texas ..... )
The thinking behind GoldMoney’s business model was that there might come a time when prudent savers would want to protect themselves from the twin risks of a global banking crisis and a loss of purchasing power of paper currencies. The first of these two risks is now upon us, and it is important that everyone with savings to protect is aware of what is happening to banks and their bank accounts. By the time this is fully understood by the media it may be too late to act.
( Templating deposits - sounds good to the Ceo of Unicredit - cue the italian bank runs.... )
CEO Of Italy's Largest Bank Says Haircuts Of Uninsured Depositors "Acceptable", Should Become A Template
While the head of the ECB and his assorted kitchen sinks scramble to explain how Diesel-BOOM was horribly misunderstood when saying that depositor impairment may and will be the template for future European bank "resolution" (as should have been the case from Day 1), the CEO of Italy's largest bank appears to have missed the memo. AsBloomberg reports, according to the chief executive Federico Ghizzoni, "uninsured deposits could be used in future bank failures provided global rulemakers agree on a common approach." Or failing that, because if Cyprus taught us anything is that Europe will never have a common approach on anything, just use deposits as impairable liabilities, period, once the day of reckoning for Non-Performing Loans comes and these are forced to be remarked to reality, just as happened in Cyprus. One can only hope that uninsured deposits do not represent a substantial portion of the bank's balance sheet because the CEO basically just told them they are next if when risk comes back to the Eurozone with a vengeance. Especially since as Mario Draghi was so helpful in pointing out, "there is no Plan B."
To wit:
Cutting large deposits in failing banks, along with other liabilities such as bonds, to offset losses is acceptable as long as small savers’ funds remain protected, Ghizzoni told reporters in Vienna late yesterday. The European Union has to introduce identical rules in all of its member states and ideally those rules would be coordinated globally, he said.
In fact, to the Italian, deposit impairment is perfectly ok as long as "everyone does it" - in other words, if it does become the template the Dutch finance minister already said it is, then all is well.
Including deposits “is acceptable if it becomes a European solution,” said Ghizzoni, 57. “What we cannot accept is differentiation country by country inside the same area. I would strongly suggest to make this decision not only within Europe but within the Basel Committee, where all countries are represented. Otherwise we would open the market for arbitrage.”Ghizzoni said deposits should only be included when bonds aren’t sufficient, and those below the guaranteed level of 100,000 euros should be off limits. While he would prefer not to touch them at all, including deposits in a global plan was a acceptable solution, he said.“The deposit issue is very sensitive,” he said. “It will become part of the discussion for the bail-in instruments related to the resolution plans of banks. I hope it will be addressed carefully and with clarity.”
Which makes perfect sense: where will those "evil, tax-evading oligarchs" go if everyone in the world says that no uninsured deposits anywhere are safe any more.
Well, perhaps Singapore? Or the Caymans? Or Lichtenstein? Or Switzerland?
Yes, there are tax havens where the banking sector is not woefully insolvent, and the rich have ways of finding out where these places are. And remember: Italy does not have capital controls to prevent the outflow of deposits. At least not yet.
But what it also means is that for a bank like UniCredit with nearly €1 trillion in assets, the liability side of its balance sheet is about to get far smaller, forcing it to readjust its balance sheet i.e., pump more equity to offset the loss of unsecured funding liabilities. One wonders just how this will happen when no European bank has made any real profits in the past several years, as for raising equity capital... forget it.
More importantly, as the chart below shows, deposits just happen to be a primary source of funding for the Italian megabank. Perhaps trying to spook them is not the smartest idea, especially if UniCredit also plans on one day "resolving" its non-performing loans (15% of total assets? 20%? 25%? 30%?) and is forced to "impair" liabilities from most junior all the way to deposits (and higher).
Ghizzoni's conclusion is perfectly expected: allay any fears that the Monte Paschi specter of depositor outflows has shifted to UniCredit:
Ghizzoni said he had been “afraid” of his clients’ reaction to the measures in the Cyprus rescue and asked for monitoring of deposit flows in all 22 European countries -- stretching from Italy, Germany and Austria as far as Russia and Turkey -- where his Milan-based bank operates. It didn’t find any loss of deposits, he said.“Really, we were afraid, we started to monitor on a daily basis the flow of deposits in different countries,” he said. “Maybe I’m disappointing you, but in reality we had no reaction so far from customers.”
Maybe the CEO should revisit this issue in a few days to a week, once the bank's clients are fully aware its CEO is perfectly happy to sacrifice the whales in order to preserve his bank's viability. Perhaps then customers will have a slightly different reaction...
http://www.zerohedge.com/news/2013-04-04/european-safe-haven-flows-drag-swiss-2y-rates-3-month-lows
European Safe-Haven Flows Drag Swiss 2Y Rates To 3-Month Lows
Despite Draghi's downbeat utterings and explanation that there is no 'Plan B', EURUSD managed to jerk higher as US macro data hit and markets opened. European stocks were banged lower after he raised downside risks for the EU economy as the hope fades from Barroso's idiotic comments yesterday. European bonds did snap wider but from a tighter base and end stll 10-15bps tighter on the week - though Portugal was battered wider. Swiss stocks are the worst performer on the week - which is odd - especially as 2Y Swiss rates plunge to -3.9bps - its lowest since mid-January as safe-haven flows surge once again. European financial stocks are now negative year-to-date, still playing catch down to European financial credit.
It's been an interesting 12 hours for the EUR as its BIS handlers are very evident...
with European financial stocks now red YTD!
As European stocks and bonds lost significant ground into the close today...
as Swiss 2Y rates push back to mid January lows...
Charts: Bloomberg
http://www.zerohedge.com/news/2013-04-04/97-spanish-social-security-pension-fund-domestic-bonds
97% Of Spanish Social Security Pension Fund In Domestic Bonds
In January, we discussed the stunning fact that Spain's social security pension fund was 90% allocated to Spanish sovereign debt. The latest data shows that this farcical epic reach-around has become even more ridiculous as, according to Bloomberg BusinessWeek, the fund's holdings are now 97% weighted to sovereign bonds. The fund purchased about EUR20bn of Spanish debt last year, while it sold EUR4.6bn of French, Dutch and German bonds. More than 70 percent of the purchases took place in the second half of the year, after Draghi's 'promise' to "do whatever it takes" moment.
It appears, since the Spanish government does not explicitly have its own Fed to monetize debt, that it has merely plundered another quasi-governmental entity to do the bond-buying reach-around. The fund, which was profitable last year on this bond-buying in its self-sustaining way, still contributes 1% to Spain's deficit as contributions to the fund are outweighed by the benefits paid.
Rules have been changed to enable this drastic concentration but at 97%, it is perhaps no wonder that Spanish bonds have been more volatile in recent weeks - as the implicit government buyer is now almost all-in. Thepotential for a vicious circle here is immense - but perhaps that is the point, more TBTF sovereigns for Draghi to deal with.
Spain’s pension reserve-fund ramped up its holdings of domestic debt last year, profiting from a rally across southern Europe and making it easier for Prime Minister Mariano Rajoy to raid the fund to finance his budget.The so-called Fondo de Reserva de la Seguridad Social in 2012 increased its domestic sovereign debt holdings to 97 percent of its assets from 90 percent at the end of 2011, according to its annual report due to be presented to lawmakers today at 12:30 p.m. in Madrid and obtained by Bloomberg News.The fund purchased about 20 billion euros ($26 billion) of Spanish debt last year, while it sold 4.6 billion euros of French, Dutch and German bonds. More than 70 percent of the purchases took place in the second half of the year, after European Central Bank President Mario Draghi pledged to do “whatever it takes” to defend the euro, boosting Spanish bonds....The bond-buying strategy enabled the fund to end 2012 with 63 billion euros, an amount equivalent to 6 percent of Spain’s gross domestic product. A 3 billion-euro gain offset part of the 7 billion euros used by Spain’s Cabinet starting from September to finance an increase in retirees’ pensions and Christmas bonuses, according to the report.Spain’s state-run social security system, also in charge of unemployment benefits, stopped registering surpluses in 2011. Its deficit was 1 percent of GDP last year, contributing to the nation’s total budget gap of 10.2 percent of GDP....The maximum amount that can be invested in a given security was increased to 35 percent of the total portfolio from 16 percent. At the same time, the fund raised to 12 percent from 11 percent its maximum share in the Treasury’s total outstanding debt. The Treasury’s debt stock was 634 billion euros in February, according to data on its website....
http://www.infowars.com/alert-all-of-the-money-in-your-bank-account-could-disappear-in-a-single-moment/
( Seized on stolen by cyber warfare - depositors money increasingly at risk.... )
ALERT: All Of The Money In Your Bank Account Could Disappear In A Single Moment
What would you do if you logged in to your bank account someday and it showed that you had a zero balance and your bank had no record that you ever had any money in your account? What would you do if all of the money in your bank account suddenly disappeared in a single moment? If you had not kept any paper records, which most Americans do not, it would be exceedingly difficult to prove to the bank that you actually had any money in the bank. If you don’t think that something like this could ever happen in the United States, you might want to think again. Cyber attacks against major banks in the United States are becoming more powerful and more sophisticated with each passing month. In fact, major U.S. bank websites have been offline for a total of 249 hours over the past six weeks. And just last month, thousands upon thousands of Chase customers logged into their bank accounts only to discover that their balances had all been reset to zero. Anyone that would want to cause complete and total economic chaos in the United States could accomplish it very easily by wiping out all of our bank account records. So please do not keep all of your money in a single bank, and from now on please keep a paper copy of all of your bank account statements. At some point it is likely that one of these cyber attacks will cause permanent damage to our banking system, and you want to be protected.
The mainstream media has generally been very quiet about the massive cyber attacks against our major banks, but behind the scenes authorities are truly alarmed. They don’t know how to stop these attacks, and they just keep getting more intense and more sophisticated.
Could you imagine how you would feel if you logged in to your bank account and all of your money was gone? That is exactly what happened to some Chase customers last month. The following is from a recent CNET article…
JP Morgan Chase denied this evening that it had suffered a hack that many customers claimed had suddenly reduced their checking account balances to zero.After discovering the apparently empty accounts via the Internet or mobile devices, many Chase banking customers turned to Twitter to express their frustration and show screen shots of zero balances. Other users were greeted with messages that their bank account balances were unavailable.
But this was most definitely not an isolated incident. That same article noted that Chase and many of our other large banks have had their websites taken down for extended periods of time lately…
Customers’ suspicions about a possible security breach are natural, with the zero balances appearing less than a week after a massive distributed-denial-of-service attack rendered Chase’s Web sites useless for many hours. Customers trying to use the site’s tools were instead greeted with a note that the site was “temporarily down.”Hackers have ratcheted up their assaults on financial institutions in recent months, using DDoS attacks to take down Wells Fargo, Bank of America, Chase, Citigroup, HSBC, and others.
In fact, as I mentioned above, major U.S. bank websites have been offline for an astounding 249 hoursover the last six weeks alone. The attacks just keep getting larger and bank officials are becoming very alarmed about the power of these cyber attacks. The following is from an article that was posted on CNBC this week…
Major U.S. bank websites have been offline a total of 249 hours in the past six weeks, perhaps the clearest indication yet that American companies are prime targets in an unrelenting, global cyber conflict.The heavier-than-usual outages are the result of a remarkable, sustained attack that began seven months ago and repeatedly knocks banks offline for hours at a time, frustrating consumers and bank security professionals alike.“Literally, these banks are just in war rooms, sitting at controls trying to stop (the attacks),” said Avivah Litan, a bank security analyst with Gartner Group, a consulting firm. “The frightening thing is (the attackers) are not using as much resources as they have on call. The attacks could be bigger.”
So who is behind these attacks?
Some are blaming Chinese hackers, others believe that Iran is behind the attacks, and yet others are convinced that it is the work of Islamic terrorists.
It is kind of frightening that they cannot positively identify who is behind these attacks. Whoever it is, they sure do seem to have a tremendous amount of resources and they are very sophisticated.
And in the future, it may not be hackers on the other side of the globe that are attacking our banks. In fact, if someone wanted to “recapitalize the banks”, all they would have to do is wipe out all of our bank account records (including all backup records). Suddenly trillions of dollars of “unsecured liabilities” (that is what our bank accounts are) would be wiped out and the banks would suddenly be solvent again. Anyone that could not produce evidence that they actually had money in the banks would be in a lot of trouble. It would be the largest single wealth transfer in the history of the world, and it would throw the U.S. economy into utter chaos. This is a scenario that I am exploring in my new novel which will be coming out later this month.
In addition, there is the constant threat that a massive EMP burst could fry all of our electronics (including the banking records), but that is a topic that I have covered in a previous article.
And of course another way that your bank account could be wiped out in a single moment is if the government decides to “legally” steal it. We just witnessed this happen in Cyprus. In February, the Central Bank of Cyprus swore that such a thing could never possibly happen, but then one month later it did happen. The politicians will lie to your face until the very day comes when they steal your money.
Sadly, a very similar thing could easily happen in the United States someday. As I wrote about yesterday, the big banks are making incredibly reckless bets with our money. When those bets go bad, our money could very well be used to cover those bets.
One way this could be accomplished is by using a practice known as “rehypothecation”. It sounds complicated, but it really isn’t. Basically, the banks use money that clients have entrusted to them to cover their own gambling debts. This is how rehypothecaton is defined by Investopedia…
“The practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by their clients.”
An excellent article by Jeff Nielson detailed how this could result in the big banks grabbing our money when their trillions of dollars of reckless bets go bad…
1) Our banking regulators knowingly allow financial institutions to engage in recklessly misleading (if not outright fraudulent) contracts with their clients, through the use of complex “small print” in their account contracts with clients.2) The three largest U.S. “banks” by deposit (JP Morgan, Bank of America, Citigroup) have made bets in their own rigged casino, which total well in excess of $100 trillion, an amount which completely dwarfs their total, combined deposits (and assets).3) A large portion of those bets occur in the $60+ trillion credit default swap market. Pay-outs in these markets can (and do) exceed 300 times the amount of the original bet. It is bets in this market which “blew up” AIG, requiring more than $150 billion in immediate government aid.4) Following the Crash of ’08; these same banks mooched a package of hand-outs, tax-breaks and “guarantees” (i.e. future hand-outs) from the Bush regime in excess of $15 trillion, the last time their gambling debts went bad on them – and all of these banks have been allowed to dramatically increase the total amount of their gambling since then.5) It would take only a minor change in the gambling contracts in which these bankers engage to allow their creditors to seize funds out of ordinary bank accounts.6) The existing language for the bank accounts of these U.S. banks is possibly already so vague (and prejudicial to clients) that it would allow these banks to reinterpret the terms of these bank accounts – and allow rehypothecation to be used to rob the holders of ordinary bank accounts, people who themselves make no “bets” in markets whatsoever. Alternately, customers could be blitzed with an offer for “new and improved” bank accounts, where terms allowing rehypothecation are slipped into the contract, with the banks knowing that the “regulators” will do nothing to warn account-holders of the gigantic risk they are taking.
But we are all covered by deposit insurance, right?
That is what the people of Cyprus thought too.
As we just saw in Cyprus, when there is a “banking crisis” sometimes government steps in and suddenly changes all of the rules overnight even though the vast majority of the population is against it.
Hopefully you can see that no bank account will ever truly be “safe” ever again.
Your money may be safe today, and your money may be there next week, but someday it could disappear in a single moment.
And the general public is definitely starting to lose faith in the banking system. Google searches for the term “bank run” have been absolutely spiking recently. Just check out this chart which shows that searches for “bank run” are now the highest that they have ever been.
So what should we all do to protect ourselves?
As I mentioned earlier, it is important to not have all of your money in one bank, and from now on you will want to permanently keep paper copies of all of your bank account statements.
Someday you may need those statements in order to prove that you actually had money in the bank.
Our world is becoming increasingly unstable, and at some point financial disaster is going to strike.
By taking prudent precautions now, hopefully you will be able to minimize the damage to your family.
http://www.zerohedge.com/news/2013-04-03/dutch-ing-bank-suffers-technical-glitch-clients-report-negative-balances
Dutch ING Bank Suffers "Technical Glitch", Clients Report Negative Balances
UPDATE: Another Dutch bank - Rabobank - is apparently having 'technical' issues now
Following yesterday's discussion of the brink-like nature of the Dutch economy (and banking system), it is perhaps just a coincidence that ING is suffering from a major failure in its Internet Banking. It is unclear how many customers are affected but judging by the scale of responses on Twitter (#ING) it is widespread. Some customers are reporting overdrafts, and incorrect balances; and are reporting cards not working at supermarkets. We are sure this will just bolster confidence in uninsured depositors at the bank - especially since, as Ad.nl reports, no one at ING was reachable for comment.
and.........
03 APRIL 2013
Are All G20 Bank Depositors Exposed to a Cyprus Style Seizure of Deposits for a 'Bail-in?'
Dave from Golden Truth has let me know of an interesting quote from an article by Eric Sprott titled Caveat Depositor which *could* explain why countries like New Zealand and Canada are quietly tilting towards seizing bank deposits to recapitalize failed banks.
"If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’”
Jeroen Dijsselbloem, March 26, 2013
Apparently this template has already been agreed to by the G20according to Dave.
"Because the use of taxpayer-funded bailouts would likely no longer be tolerated by the public, a new bank rescue plan was needed. As it turns out, this new "bail-in" model is based on an agreement that was the result of a bank bail-out model that was drafted by a sub-committee of the BIS (Bank for International Settlement) and endorsed at a G20 summit in 2011.
For those of you who don't know, the BIS is the global "Central Bank" of Central Banks. As such it is the world's most powerful financial institution. I sourced a copy of this Agreement here: LINK...
...the agreement references specifically avoiding more taxpayer bailouts. It also refers to bank deposits in excess of Government insured amounts as "uninsured creditors." This is essentially the standard legal bankruptcy model which uses creditor hierarchy (secured lenders, unsecured lenders, preferred equity, equity) and applies to the rescuing of banks.
This is very important to know about and understand because what is commonly referred to as a "bail-in" in Cyprus is actually a global bank rescue model that was derived and ratified nearly two years ago. It also means that bank deposits in excess of Government insured amounts in any bank in any country will be treated like unsecured debt if the bank goes belly-up and is restructured in some form.
Because this is a legal Central Banking agreement that will be applied globally, it also means that U.S. bank depositors will not be immune to this rescue mechanism. It means that no one should keep any amount in any bank that exceeds the FDIC guarantee. In fact, I would recommend only keeping enough money in the bank to fund your monthly or quarterly bill paying requirements. Any amount in excess of FDIC deposit insurance will be exposed to the risk bankruptcy."
You may read the entire article at Dave's blog Golden Truth.
I would assume that if Dave's reading of this document is correct, unless there is a specific and unequivocal denial by your local government Administration, then this is the operative plan for another series of bank failures in the G20 countries, including the US, Germany, France, Italy, and the UK. This would explain how these stealthy depositor seizure plans have been bubbling up from diverse countries.
I would not be satisfied if there was merely a dismissal of the possibility, that Cyprus was somehow a 'special case' because of the way in which their banks were capitalized, and so heavy with deposits. In the event of a global derivatives meltdown, no capital structure will stand, and no bank can maintain a so-called 'fortress balance sheet' while they are gambling wildly with speculative leverage on the side.
I do not wish to seem to be an alarmist, but this additional information and some of the other events which are occurring has created a rather significant shift in my thinking. Cash is not cash and deposits are no longer deposits as we once thought of them in this non-transparent, post-Glass Steagall financial world of ours.
Congratulations. You may now be an unsecured creditor of your local TBTF bankif your and yours have any money on deposit there, either directly or indirectly. You say you have money in a pension fund and an IRA at XYZ bank? Oops, it is really on deposit in you-know-who's bank. You say you have money in a brokerage account? Oops, it is really being held overnight in their TBTF bank. Remember MF Global?
Who can say how far the entanglements go? The current financial system and market structure is crazy with hidden risk, insider dealings, control frauds, and subtle dangers. Jim Chanos says that the cheating is so widespread and unpunished that it becomes almost a fiduciary responsibility to break the rules.
No wonder people are so edgy. I think the plutocrats have gone too far, but are so detached and out of touch that they have not figured it out yet. And when the awaking comes, it will be quite a surprise to many.
To my correspondents who say they have spoken to their elected representatives about this and received assurances, I would not assume that they are aware of this international agreement which the US has presumably signed. I was not.
And if you think they will stand up against any plans to take your deposits during a banking emergency, against a vociferous and overwhelming flood of objections from their constituents, remember how quickly the Congress caved on TARP and Cyprus' Parliament gave way to the EU and ECB.
Welcome to the abyss.
( you know where they are heading folks and its not Odessa , Texas ..... )
Danger in bank accounts
2013-APR-01
The thinking behind GoldMoney’s business model was that there might come a time when prudent savers would want to protect themselves from the twin risks of a global banking crisis and a loss of purchasing power of paper currencies. The first of these two risks is now upon us, and it is important that everyone with savings to protect is aware of what is happening to banks and their bank accounts. By the time this is fully understood by the media it may be too late to act.
It has been obvious for some time that banks in many jurisdictions are insolvent and that they are simply too big for governments to rescue. Furthermore, while some governments feel they have a reasonable chance of muddling through, they are all aware that a crisis in one major nation, such as Spain or Italy would most probably lead to a chain of defaults beyond anyone’s control. It should come as no surprise that central bankers have been considering how to deal with this problem and that they have resolved a solution.
That solution, as we saw clumsily applied in Cyprus, is for central banks to use creditors’ funds to rescue banks in difficulty, which includes uninsured deposits, instead of taxpayers’ money. What this means is that if you have deposits greater than the level guaranteed by your government, the unguaranteed portion (in the eurozone, over €100,000) is free to be used to recapitalise the bank.
This is a major departure from past assumptions, that central banks would do their utmost to rescue banks without raiding any deposits. As many ordinary savers in Cyprus found to their cost, this is no longer true. The new approach has been agreed at the highest levels, at the Bank for International Settlements, the central bankers’ central bank. It has been a topic under consideration since the publication by the Financial Stability Board (a BIS committee) of a paper, Key Attributes of Effective Resolution Regimes for Financial Institutions in October 2011, which was endorsed at the Cannes G20 summit the following month. This was followed by a consultative document in November 2012, Recovery and Resolution Planning: Making the Key Attributes Requirements Operational. In this latter document it is stated in the introduction that “Reforms are now underway in many jurisdictions to align national resolution frameworks more closely with the Key Attributes (i.e. the October 2011 paper). In other words any changes to law have been or are being made.
This confirms that G20 members are ensuring that they can legally override the rights of creditors, including uninsured depositors. This outcome is not difficult to achieve when the alternative in almost all cases of bank failure is for uninsured deposits to be wiped out completely.
The status of deposits
It is commonly assumed that money on deposit belongs to the depositor. This is not true, because the depositor lends his money to the bank, so the money becomes the bank’s property and merely owes it to the depositor. The depositor is usually the most senior class of unsecured creditor. There are however three broad classes of deposit to consider:
- Insured deposits, guaranteed by a government or government agency. These protect smaller deposits up to a limit set by government;
- Uninsured deposits owed to non-monetary and non-financial institutions (non-MFIs); and
- Wholesale deposits owed to monetary and financial institutions (MFIs).
The BIS proposals being enacted throughout the G20 allow for different treatment for these deposit classes in a bank rescue. The government or its agency is going to have to pay out for insured deposits anyway, so it makes sense for them to remain untouched. Wholesale deposits, which are not the focus of the BIS proposal, are unlikely to be touched except in the case of very small bank failures, because of the risks spreading to other banks and financial institutions. This leaves the full burden of depositor contributions to a bank rescue falling on the shoulders of uninsured non-MFIs. In other words any deposit in excess of the insured amount owned by individuals, companies, trusts, pension funds and other savings vehicles, and any segregated client accounts operated by a business lawyers and brokers acting as agents for its customers is likely to be raided where there is a risk of bank failure. Any business receiving payments into its bank account in excess of the insured limit is similarly at risk.
Anyone in this position is simply being negligent if he or she assumes deposits are safe. The smaller a bank’s uninsured non-MFI depositor base is relative to the other depositor classes the greater the amount these depositors will lose in a bank rescue. Therefore non-insured deposits are particularly vulnerable in retail and high street banks targeting small savers, such as mortgage and savings banks, as well as banks with a large element of wholesale funding.
What are the alternatives?
Uninsured non-MFI depositors have three broad choices.
- They can move their deposits to a bank they feel is safe. This may reduce a specific risk, but does not eliminate depositor risk, bearing in mind that all G20 jurisdictions will substitute uninsured non-MFI deposits for tax-payers funds in a bank rescue.
- They can spread their deposits between several unrelated banks so that each one is insured. This may be a practical solution for deposits up to two or three times the insured level.
- They can reduce their deposits by acquiring something else.
The first two options need little further comment, but the third must be explored further. Physical cash is an option but impractical except for relatively small amounts, because most governments have moved to restrict its use by the imposition of anti-money laundering and other rules. The two further alternatives are to invest in securitised alternatives, such as government bonds and other instruments, or in precious metals. And in the case of precious metals, there are mining shares, ETFs and possession of physical metal.
The case for precious metals
The fact that the BIS feels it has been necessary to co-ordinate G20 nations into a common approach to bank rescues using uninsured non-MFI deposits is evidence that bank failures capable of threatening the global financial system are definitely an on-going risk. The central banks will have calculated that raiding this category of deposits is a matter of expediency, and any run on deposits out of vulnerable banks can be contained by central banks acting as lender of last resort. This is based on the simple fact that either deposits are moved around the system, or when they are drawn down in favour of something else, the money released remains in the banking system. However, raiding these deposits is only an interim solution, because the underlying assumption is that the financial condition of the whole banking system does not deteriorate further.
It is not the intention of this article to argue for or against this assumption, beyond pointing out that the BIS approach is merely a stop-gap solution that does not deal with underlying economic and financial problems. The difficulties governments face cannot be resolved by just applying sticking plaster on insolvent banks.
Depositors are learning that governments, acting in the name of the tax-payer, will do anything for their own survival, debasing savings to cover state spending and now raiding deposits to maintain the status quo. Many depositors take the view that holding short-dated government bonds and similar assets priced on the bank of interest rates is risky, which is why they have money on deposit. It is therefore very likely that deposit money will flow into precious metals.
It was with this in mind that GoldMoney was set up over 10 years ago to provide a safe haven from both banking and currency risks. It was recognised that in the event of a system-wide financial and banking crisis, finding a genuinely secure safe-haven is not easy. It remains GoldMoney’s objective to provide this facility.
Customers buy and sell precious metals through GoldMoney that are held in secure vaults in five different jurisdictions, outside and independent from the banking and financial system. Importantly and unlike a bank deposit, gold, silver, platinum and palladium remain the customer’s property, vaulted, insured, identified and fully audited every quarter.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9970294/Helicopter-QE-will-never-be-reversed.html
( Finally we are seeing admissions that the QE ponzi schemes unleashed can never end - as the end of ponzi financing would of course blow up the banks that are still insolvent .... which gets up back to why uninsured deposits will be stolen in the G-20..... )
7:49PM BST 03 Apr 2013
336 Comments
Columbia Professor Michael Woodford, the world's most closely followed monetary theorist, says it is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better.
"All this talk of exit strategies is deeply negative," he told a London Business School seminar on the merits of Helicopter money, or "overt monetary financing".
He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit.
"If we are going to scare the horses, let's scare them properly. Let's go further and eliminate government debt on the bloated balance sheet of central banks," he said. This could done with a flick of the fingers. The debt would vanish.
Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent."
