Tag Archives: bail-in

BoE Says G20 Nations To Enact Bank Deposits Theft Within 12 Months

1 Nov
"The UK at the heart of a renewed globalisation" - Bank of England, 24 October 2013, speech by Governor Mark Carney

“The UK at the heart of a renewed globalisation” – Bank of England, 24 October 2013, speech by Governor Mark Carney

In a speech given in London on 24th October, former Goldman Sachs alumnus, now Governor of the Bank of England and chairman of the internationalist Financial Stability Board, Mark Carney, announced the target date for completion of the new global bank “bail-in” regime (‘The UK at the heart of a renewed globalisation,’ page 5, pdf here):

Systemic resilience depends on being able to resolve failing banks in a way that does not threaten the entire system…

To avoid these risks, we need to make the resolution of global banks a real option…

At the St Petersburg summit in September, G20 leaders mandated the FSB to develop these proposals. The Bank of England is now working intensively with other authorities and the financial industry. Our aim is to complete the job by the next G20 Summit in Brisbane.

The G20 summit in Brisbane is on 15-16 November, 2014.

The terms “resolution”, “resolve”, and “resolving” will be quite familiar to regular readers.

Here at barnabyisright.com, for many months now we have (exclusively?) analysed, and publicised, the secretive international banker plan to “resolve” (ie, “bail-in”, a la Cyprus) insolvent banks across the globe — including Australia. Unsurprisingly, no one in the mainstream media has yet touched the subject.

For those interested to learn more:

G20 Governments ALL Agreed To Cyprus-Style Theft Of Bank Deposits … In 2010

Australia Plans Cyprus-Style “Bail-In” Of Banks In 2013-14 Budget

Australian Banks “Welcome” Cyprus-Style Bail-In Plan

IMF Tells Australian Lawmakers To “Prevent Premature Disclosure Of Sensitive Information” On Bank Bail-Ins

Australian Banks Demand Protection From Derivatives Losses Under Bail-In Plan

Crisis Management: APRA To Be Given Power To “Direct” Your Super

New Zealand Banks “Pre-positioning For Cyprus-Style Bail-In

Canada Plans Cyprus-Style “Bail-In” Using Depositors Money

Timeline For “Bail-In” Of G20 Banking System

IMF Calls For 10% “Tax” On All EU Households With “Positive Wealth”

UPDATE:

My fail. Comprehension fail. I read it wrong.

It appears that the “job” freshly mandated by the G20, the one Carney aims to see completed by the G20 Summit in November 2014, is not the enacting of legislation enabling bank bail-ins. Rather, it is for the FSB “to assess and develop proposals by end-2014 on the adequacy of global systemically important institutions’ loss absorbing capacity when they fail”:

Screen shot 2013-11-02 at 7.51.18 AM

Nonetheless, the FSB’s Narrative Progress Report on Financial Reforms to the St Petersburg G20 Summit makes clear (page 4-5) that “legislative reforms to implement the Key Attributes of Effective Resolution Regimes [TBI: which includes the plan for depositor bail-ins] are necessary… further actions are needed to give authorities additional resolution powers and … We therefore urge that all G20 countries change legislation as needed to meet the Key Attributes by end-2015” …

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And the St Petersburg G20 Summit Leaders Declaration (page 17) makes clear that our political leaders continue to write completely blank cheques to the private banking industry — using bank depositors’ accounts — by happily going along with every single thing they are told to do by the ex-Goldman Sachs alumni-chaired FSB:

“We renew our commitment to make any necessary reforms to implement the FSB’s Key Attributes of Effective Resolution Regimes for all parts of the financial sector that could cause systemic problems.”

Screen shot 2013-11-02 at 7.44.20 AM

We will be watching the new laws submitted to Parliament by the Abbott government very closely in coming months. Especially given the banksters’ man, Joe Hockey, is Treasurer, and couldn’t wait to get over to Wall Street to receive his instructions immediately after the election.

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IMF Calls For 10% “Tax” On All EU Households With “Positive Wealth”

20 Oct
Click to enlarge

Click to enlarge

Still on hiatus, but had to share this.

From the International Monetary Fund (IMF) October 2013 Fiscal Monitor: Taxing Times, page 49 (my bold added):

Box 6. A One-Off Capital Levy?

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair) …

Yes, no doubt “some” of those who have enjoyed the benefits of debt-financed “prosperity” would see a raid on households with real savings as “fair”.

… There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II…

We’ve done it before. Why not do it again?

… Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight

Hurry up. Take the prudent savers’ money, before they find out what we’re planning.

… The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.

And there are still some — usually those pillorying excessive private debt — who argue that the level of public debt does not matter.

Some excellent commentary on this IMF document from John Ward at The Slog here.

In other news, it appears the USA has begun to introduce capital controls. From Sovereign Man, October 16:

The path to tyranny is almost always paved with good intentions.

And so, enter stage left, the innocuously named Consumer Financial Protection Bureau (CFPB).

These government agencies with the catchy, high-sounding names are always the most dangerous. After all, it was the ‘Committee for Public Safety’ that was responsible for wanton genocide during the post revolution Reign of Terror in France.

Recently, the CFPB ‘encouraged’ retail banks in the Land of the Free to ‘help’ their customers regarding international wire transfers. And by ‘help’, they mean prohibit.

Of course it’s all for ‘consumer protection’.. So under the guise of safety and security, several banks will curtail retail customers’ abilities to send international wire transfers.

Chase, for example, will start to limit cash withdrawals and ban business customers from sending international wire transfers from November 17 onward.

And starting October 20th, HSBC USA’s Premier clients will have to wait a minimum of five days before transferring funds to their OWN international accounts!

This is the very nature of capital controls– restricting the free flow of capital across borders until it is trapped inside the country and forcibly denominated in a rapidly devaluing currency.

Moral of the above: If your government knows you have it, they will take it.

Take Your Money Out Of The Bank

5 Sep

As we here at barnabyisright.com were first to document, Australia too has included plans to steal depositor’s money to “bail-in” the banks, in the 2013-14 Budget:

Australia Plans Cyprus-Style “Bail-in” Of Banks In 2013-14 Budget

Australian Banks “Welcome” Cyprus-Style Bail-In Plan

Australian Banks Demand Protection From Derivatives Losses Under Bail-In Plan

G20 Governments ALL Agreed To Cyprus-Style Theft Of Bank Deposits … In 2010

Australian Banks Demand Protection From Derivatives Losses Under Bail-In Plan

8 Aug

DeathStarFiring2

It has been well-documented by others that the Cyprus-style bank “bail-in” scheme that is presently being prepared right across the G20, is really all about derivatives — those “financial weapons of mass destruction” that were at the heart of the GFC in 2008 (see Derivatives Managed By Mega-Banks Threaten Your Bank Account).

To briefly summarise, a critical aspect of what the bail-in scheme is intended to do, is to prioritise the payment of banks’ derivatives obligations to each other, ahead of depositors. In other words, it is about stealing the public’s bank deposits, to pay out at least some of the big banks’ Death Star-massive — and toxic — derivatives positions.

Yves Smith of Naked Capitalism explains:

In the US, depositors have actually been put in a worse position than Cyprus deposit-holders, at least if they are at the big banks that play in the derivatives casino. The regulators have turned a blind eye as banks use their depositories to fund derivatives exposures. And as bad as that is, the depositors, unlike their Cypriot confreres, aren’t even senior creditors. Remember Lehman? When the investment bank failed, unsecured creditors (and remember, depositors are unsecured creditors) got eight cents on the dollar. One big reason was that derivatives counterparties require collateral for any exposures, meaning they are secured creditors. The 2005 bankruptcy reforms made derivatives counterparties senior to unsecured lenders.

Note carefully that last point about the “collateral” for derivatives exposures, which means that derivatives counterparties are deemed “secured” creditors, making them “senior” to unsecured “lenders”.

In layman’s terms, what all that means is that when banks take out a derivatives bet, the bank on the other side of that bet (the “counterparty”) requires some collateral to be put up. Thanks to deregulation of the financial system over the past couple of decades, banks have — unbeknown to the public — been putting up their customers deposits as collateral for their derivatives bets.

Now, because collateral (or “security”) has been put up for those derivatives bets (or “positions”), this means that those bets are considered “secured”. And in a bank “resolution” (ie, a “bail-in”), the secured creditor has seniority (ie, priority) over “unsecured” creditors (ie, depositors).

Got that?

The big banks are all counterparties to each other on their derivatives bets. They have pledged “collateral” — often, your deposits — as “security” on those derivatives bets. When a bank fails, and is “resolved” under the new, FSB-directed bail-in regime, payouts on those “secured” derivatives bets get priority over paying you back your deposit.

Here at barnabyisright.com, we have recently been looking at the documents going back and forth between the Australian Treasury and the Australian banks. And it is here that we find confirmation of what has been reported by Yves Smith and others.

In the Australian Financial Markets Association (AFMA) 11 January 2013 letter in reply to the Australian Treasury’s September 2012 consultation paper, Strengthening APRA’s Crisis Management Powers,” we see clearly that our banks consider the issue of how derivatives would be handled in a bank bail-in to be “critical”:

Legal certainty around the enforceability of the netting and collateral arrangements in connection with OTC derivatives is critical to the stability of the market.

AFMA, January 2013, page 14

AFMA, January 2013, page 14

In particular, what the banks are concerned with — so much so, they call it a “guiding principle” in their response to Treasury — is ensuring that the implementation of bail-ins in Australia will “include appropriate respect for…collateral rights”, with safeguards to protect their derivatives positions against “destruction of value”:

Governing our response to the Consultation Paper are three guiding principles:

Ensuring consistent treatment of transactional claims relating to derivatives and other financial instrument, including appropriate respect for netting and collateral rights, subject to safeguards to avoid destruction of value.

AFMA, January 2013, page 2

AFMA, January 2013, page 2

The international bankers (the Financial Stability Board) who are behind the G20-wide bank bail-in scheme, have sought to portray it as being designed to “resolve” failing banks, while at the same time, “protecting” bank depositors.

However, the truth is that the FSB bail-in scheme is really designed to ensure that the mega-banks — “systemically important financial institutions (SIFI)” — will receive priority for payout on their derivatives positions, in any “resolution” of a failing bank.

Because for the bankers, propping themselves and their compadres up is all that matters. What we call “theft”, they call “ensuring financial system stability”.

According to the RBA, our banking system holds $21.5 Trillion in “Off-Balance Sheet” derivatives exposures:

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Over $15 Trillion of that is the “value” of derivatives betting on interest rates.

In the “bail-in” of an Australian bank, do you really think there would be anything left to pay you back your deposit, after the banks get “seniority” for payout on their “secured” derivative positions?

See also:

Australian Banks “Welcome” Cyprus-Style Bail-In Plan

IMF Tells Australian Lawmakers To “Prevent Premature Disclosure Of Sensitive Information” On Bank Bail-Ins

Australia Plans Cyprus-Style “Bail-In” Of Banks In 2013-14 Budget

Government’s Hand To Dip Right Into Your Bank Account

1 Aug

k-bigpic

No surprises here for regular readers.

From today’s Australian Financial Review:

The federal government will prop up the budget bottom line with a new levy on banks that will be badged as providing insurance in case future bailouts are needed.

The Australian Financial Review has learned that the government’s economic statement, set to be released Friday, will contain a deposit insurance levy as recommended by the Council of Financial Regulators, which will raise funds to underwrite any Australian bank should it need assistance in the future.

The proposed levy would be between 0.05 per cent and 0.1 per cent. Presently, the government guarantees deposits up to $250,000 without charging the banks.

Actually, the AFR has it wrong. Or at least, incomplete.

Yes, the Council of Financial Regulators may have “recommended” this.

But the real shot-callers, are the banksters at the IMF and the Financial Stability Board.

Recently, we saw that the IMF criticised the 2007 Rudd Government’s deposits guarantee scheme, introduced in a panic in response to the GFC. They said that, because of the “extreme concentration” in the Australian banking system, the Rudd scheme “increased moral hazard greatly”:

Australia: Financial Safety Net and Crisis Management Framework. Source: IMF (click to enlarge)

Australia: Financial Safety Net and Crisis Management Framework. Source: IMF (click to enlarge)

The IMF’s suggested solution to this “moral hazard” problem, was to make the banks pay “premiums” towards a “reserve fund” that could be used to support payouts under a depositor guarantee.

However, the IMF also noted that even if a requirement for premium contributions was established, Australia’s banking system is so highly concentrated that “it may be difficult to establish a fund of sufficient size that the deposit guarantee would seem credible” –

Click to enlarge

Click to enlarge

So what we have now, is the Rudd Government doing what the IMF says — introducing a “premium” levy on the banks — to (supposedly) establish a “reserve fund” for the deposits guarantee scheme.

But according to the AFR’s “source”, what the ALP will actually use this fee for, is to fill some of their ever-growing budget black hole:

A senior source said the levy would build up funds “over time” and would take several years to reach the billions. He said it would raise less than $1 billion over the forward estimates but build over the outer years.

The revenue raised by the levy will also be added to the budget bottom line, helping the government offset a forecast plunge in revenues since the May budget and meet its target of returning to surplus in 2016-17.

“It won’t fix the surplus problem in itself but it will help,’’ the source said.

The source said while the money collected would count as revenue, should the fund ever be drawn upon it would count as expenditure.

What we have here, then, is a supposed “fix” to the deposits guarantee scheme.

A “fix” that even the IMF says is not “credible”, because of the “extreme concentration” in our banking sector.

A “fix” that means the banks will now take more money off you (fees), to pay the new levy.

A “fix” that the government will really use for political purposes — to make its ever-deteriorating budget numbers look better.

How long will it be until we get our first bank bail-in, I wonder?

Related info here:

IMF Says Rudd’s Depositor Guarantee Scheme “Increases Moral Hazard Greatly”

Australia Plans Cyprus-Style Bail-In Of Banks In 2013-14 Budget

G20 Governments All Agreed To Cyprus-Style Theft Of Bank Deposits… In 2010

IMF Tells Australian Lawmakers To “Prevent Premature Disclosure Of Sensitive Information” On Bank Bail-Ins

Moodys Warns Of Australian Banking Collapse

 

UPDATE:

As I was saying (a week ago). This from the ABC –

Finance Minister Penny Wong would not comment on the reports but says a levy is something the Government has been looking into.

The IMF and the RBA have put a view to the Government for a need for a fund to cover deposit protection,” she said.

Treasurer Chris Bowen is meeting with representatives from the Australian Banking Association in Sydney this afternoon to further consult on a possible deposit-protection levy.

Mr Bowen pointed to a report from the International Monetary Fund (IMF) which he says highlights a gap in Australia’s public policy when it comes to “provisioning for any potential bank or deposit-taking institution failure”.

As expected.

The government will point to the IMF’s report, as justification for their action.

Conveniently neglecting to mention, of course, that the IMF also indicated that the real problem is the “extreme concentration” in our banking sector, and because of that, establishing a reserve fund is not a credible solution to the problem of convincing depositors (ie, deceiving them into believing) that their deposits are protected.

UPDATE:

Reports that the “levy” will raise $733 million; banks to pass on the cost to customers; the money supposedly “quarantined” but the government will add the number to its Budget bottom line anyway, “for accounting purposes” (from the Guardian):

A new levy on Australia’s banks will raise $733m, adding to a tobacco tax rise worth $5.3bn to be unveiled in the Rudd government’s looming economic statement.

The government will create a financial stability fund recommended by the International Monetary Fund, the Reserve Bank of Australia and the Council of Financial Regulators, paid for by the levy on the banks.

The fund is designed as insurance in the event that a big Australian bank requires a bailout owing to global instability.

Er … owing to “global” instability?

We’ve plenty of internal instability to worry about. Just ask Moodys ratings agency.

The levy will be collected by the banking regulator, the Australian Prudential Regulation Authority, and deposited into a fund administered by a government agency. The money will be quarantined but, for accounting purposes, will go to the bottom line. The measure will help the government meet its surplus target for 2016-17.

The levy is not expected to take effect until January 2016. The government envisages imposing a notional 5 basis points levy on deposits of up to $250,000 for each account holder at every bank, mutual bank or credit union.

Banks are expected to pass the cost of the levy to their customers.

Which just goes to prove what a complete, total deceit a government budget really is.

A mass of shoddy “forecasts” and “projections”, cunning “revisions” and dishonest accounting tricks, all designed to make the government of the day look good .. for one day .. in May .. when they announce it.

IMF Says Rudd’s Depositor Guarantee Scheme “Increases Moral Hazard Greatly”

25 Jul

It’s yet another Rudd Labor disaster, just waiting to happen.

According to the IMF’s November 2012 technical note, Australia: Financial Safety Net and Crisis Management Framework, page 26, not only is there an “extreme concentration” in our banking system; the Financial Claims Scheme (FCS) introduced by the Rudd Government in 2008 “increases moral hazard greatly” –

Australia: Financial Safety Net and Crisis Management Framework. Source: IMF (click to enlarge)

Australia: Financial Safety Net and Crisis Management Framework. Source: IMF (click to enlarge)

Why so?

The IMF says that, unlike “most” similar schemes elsewhere, the Rudd scheme does not require the banks to make any contributions towards pre-funding of the guarantee. The responsibility for funding it, falls on the government. Meaning, the taxpayer.

Indeed, the IMF points out that the government may need to increase the public debt limit above the present $300 billion ceiling, if payouts under the scheme became necessary –

Click to enlarge

Click to enlarge

The IMF’s suggested solution to this “moral hazard” problem, is to make the banks pay “premiums” towards a “reserve fund” that could be used to support payouts under a depositor guarantee. However, the IMF also notes that even if a requirement for premium contributions was established, Australia’s banking system is so highly concentrated that “it may be difficult to establish a fund of sufficient size that the deposit guarantee would seem credible”

Click to enlarge

Click to enlarge

When you pause to carefully think this through, merely forcing the banks to pay a premium contribution towards a depositor claims reserve fund is really a rather ridiculous non-solution to the highlighted problem of moral hazard. It is analogous to charging an insurance premium for a policy that promises to pay for the ticket if the banker gets caught speeding –

121807_2025_MoralHazard2

We have recently seen the evidence in the Portfolio Budget Statements (page 134) for Budget 2013-14 that the government is now well-advanced in preparations for a Cyprus-style “bail-in” of our banks.

We have also seen the recent warning by Moodys ratings agency that our banking system has the world’s highest exposure to mortgages, and so is vulnerable to collapse if house prices fall.

Combine this with the IMF’s warning about Rudd Labor’s rushed and bungled depositor guarantee scheme that “increases moral hazard greatly”, and it is increasingly clear that I will soon have to redraft the debt trajectory chart on the masthead of this blog.

It only goes up to $300 billion.

See also:

The Bank Deposits Guarantee Is No Guarantee At All

Crisis Management: APRA To Be Given Power To “Direct” Your Super

17 Jul
Australian Treasury,  Strengthening APRA's Crisis Management Powers, September 2012, page 34 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 34 (click to enlarge)

It’s been a big week for your humble blogger, vis-a-vis finding incriminating evidence on government websites.

Here’s another example of something I have warned of (repeatedly) since the inception of this blog, now coming to fruition.

That like so many other countries in the Western world since 2008, our government too would, someday, use the pretext of “crisis management” to steal your super to prop up an insolvent financial system.

Today, we learn that the Orwellian euphemism that has been chosen to describe this process in Australia, is “direction powers”.

From the Australian Treasury’s Consultation Paper, Strengthening APRA’s Crisis Management Powers, September 2012 (my bold emphasis added):

2.3.1 Potential new direction triggers

…it is being considered whether APRA should have new direction powers in relation to superannuation.

The purpose of the direction powers would be for the rectification of significant problems, in the nature of an enforcement power.

Possible triggers for the issue of a direction might include:

  • a breach of the RSE licensee law or licence condition;
  • an anticipated breach of the RSE licensee law or licence condition;
  • promoting instability in the Australian financial system;
  • conducting affairs in an improper or financially unsound way; and
  • where the failure to issue the direction would materially prejudice the interests or reasonable expectations of beneficiaries of the superannuation entity.

Note carefully what is being described here.

Earlier in the same document, the Treasury department bemoaned that:

APRA has comprehensive direction powers in relation to ADIs, general insurers and life insurers but not in relation to RSE licensees, even though the superannuation sector holds approximately $1.4 trillion in savings and a number of superannuation entities hold tens of billions of dollars in assets.

Oh dear! All that money, just sitting there making private sector fund managers rich on fees, and they (the government) don’t have the power to direct what happens to it. Sacre bleu!

Treasury went on to say that APRA needs an “early intervention tool” that is “preemptive”, and so allows it to “address a superannuation entity’s deterioration or non-compliance with prudential requirements”:

Australian Treasury, Strengthening APRA's Crisis Management Powers, September 2012, page 34 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 34 (click to enlarge)

Now here is where the cunning comes in.

How do you ensure that you give yourself the ability to “trigger” your new “enforcement power”, in order to give “direction” to a superannuation fund to … oh let’s say … direct a percentage of its (ie, yours, dear reader) money into government bonds to support the national government’s solvency? Or to the shares of a collapsing bank? Or to the shares in a new “bridging institution”, as directed by the FSB under its new, G20-wide bank resolution “bail-in” regime?

Easy.

You establish a set of “triggers” for your new “direction power”. Just like those they have listed above. Including, most notably, the trigger that — in their judgment — “the failure to issue the direction would materially prejudice the interests or reasonable expectations of beneficiaries of the superannuation entity.”

In other words, if APRA (or the IMF, or FSB, who now tell APRA what to do) were to decide that it “would materially prejudice” your interests if they did NOT “direct” your super fund to do whatever the government wants, then that is all the “trigger” they need to enforce a “direction” on your super savings.

Don’t believe me?

Think I’m twisting what they said?

Read it again.

Very carefully.

With special note of this:

Enhancing direction powers in superannuation would allow APRA to detail specifically how an entity must address an identified concern. Direction powers would enable APRA to direct the entity as to what should be done to remedy the situation…

What if the “identified concern” is that failure to issue the direction would materially prejudice the interests or reasonable expectations of beneficiaries of the superannuation entity”?

Or what if the “identified concern” is simply that the super funds are not parking your money in the “investments” that the government wants them to, and that this is or could be “promoting instability in the Australian financial system” — another one of the “triggers” listed?

By this action, the government is effectively abrogating to itself what is essentially an unlimited power to “direct” your super fund to do “specifically” whatever the government says with your money, under the dangerously broad, and subjective, Big-Brother-Knows-Best pretext that “failure to issue the direction would materially prejudice” your interests.

See also:

Your Super Screwed By The Laboral Party

Stealing Our Super – I DARE You To Ignore This Now

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