Tag Archives: cyprus

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”:

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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.”

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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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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

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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

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

17 Jul

IMF_technote_Nov2012

IMF: Financial Safety Net and Crisis Management Framework, November 2012, page 4 (click to enlarge)

IMF: Financial Safety Net and Crisis Management Framework, November 2012, page 4 (click to enlarge)

IMF: Financial Safety Net and Crisis Management Framework, November 2012, page 5 (click to enlarge)

IMF: Financial Safety Net and Crisis Management Framework, November 2012, page 5 (click to enlarge)

 

Orwell would be impressed with this.

In a November 2012 Technical Note on the Financial Sector Program Update for Australia, as part of their Financial Safety Net and Crisis Management Framework, the IMF has advised that there is a problem (my bold emphasis added):

Past simulation exercises revealed the need for legislative changes to prevent premature disclosure of sensitive information. Australia’s securities disclosure regime requires, for the protection of investors, immediate and continuous disclosure of information that could reasonably be expected to have a material effect on the price or value of an ADI’s securities. There is a high probability that any resolution or crisis response measures will impact the price or value of an authorized deposit-taking institution’s (ADI’s) securities.

Poor coordination of compliance with the disclosure requirements, timing of resolution or crisis response actions, and the overall public communication strategy regarding these actions could pose risks to financial stability (e.g., through depositor runs) or thwart resolution actions (e.g., through the stripping of the ADI’s assets by insiders) or cause market disruptions. Legislative changes that reduce tension between investor protection and financial stability should be pursued.

“Reduce tension” between investor protection and financial stability?!

By making laws to “prevent premature disclosure of sensitive information”?!?!

In order to prevent bank runs, which would happen if investors were to find out that a Cyprus-style “resolution or crisis response measure” is in the offing for the bank that they have their money in?!?!!!!

Truly, moral relativism is one of The greatest evils of our time.

These people have no Conscience.

None.

UPDATE:

The Treasury department put this problem to the banks in their September 2012 Consultation Paper, with a proposal to suspend the continuous disclosure requirements:

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 26 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 26 (click to enlarge)

Australian Treasury, Strengthening APRA's Crisis Management Powers, September 2012, page 29 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 29 (click to enlarge)

… and unsurprisingly, the banks have agreed to it:

AFMA, letter to Australian Treasury, January 2013, pp 7-8 (click to enlarge)

AFMA, letter to Australian Treasury, January 2013, pp 7-8 (click to enlarge)

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

17 Jul
AFMA letter to Australian Treasury, 11 January 2013, page 5 (click to enlarge)

AFMA letter to Australian Treasury, 11 January 2013, page 5 (click to enlarge)

On 11 January 2013, the Australian Financial Markets Association (AFMA) responded to the Australian Treasury regarding the government’s Consultation Paper (September 2012) Strengthening APRA’s Crisis Management Powers.

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There is much of interest in AFMA’s letter.

But this (page 5) is arguably the “money quote” that should be of most interest to Aussies with savings in a bank:

“The FSB’s Key Attributes lays out its principles for executing a bail-in within resolution. We welcome the role of the bail-in tool for a resolution.”

The Australian Treasury’s consultation paper further evidences that the internationalist, Goldman-Sachs chaired, FSB-directed new regime for Cyprus-style bail-in of banks using depositors savings was endorsed by the G20:

Australian Treasury, Strengthening APRA's Crisis Management Powers, September 2012, page 4 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 4 (click to enlarge)

Treasury_StrengtheningAPRA_cover

… and that bail-in of Australian banks is an FSB requirement, one that will be enforced by APRA as Australia’s “resolution authority”, under new “robust statutory powers”:

Australian Treasury, Strengthening APRA's Crisis Management Powers, September 2012, page 5 (click to enlarge)

Australian Treasury, Strengthening APRA’s Crisis Management Powers, September 2012, page 5 (click to enlarge)

More to come.

See also:

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

Timeline For “Bail-In” Of G20 Banking System

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

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

15 Jul

New Zealand has joined with Europe, the USA, the UK, Canada, and Australia, in preparing to “bail-in” its banks.

Excerpted from Timeline For “Bail-In” Of G20 Banking System:

JUNE, 2013 – Reserve Bank of New Zealand releases its Open Bank Resolution (OBR) Pre-positioning Requirements Policy, stating that the OBR “provides the flexibility to assign losses to creditors“ (meaning, bank depositors):

Reserve Bank of New Zealand, Open Bank Resolution (OBR) Pre-positioning Requirements Policy, June 2013 (click to enlarge)

Reserve Bank of New Zealand, Open Bank Resolution (OBR) Pre-positioning Requirements Policy, June 2013 (click to enlarge)

In Definitions, the OBR states that “‘Customer account’, ‘customer liabilities’, or ‘customer liability accounts’ are unsecured liabilities of the bank represented by a range of products such as cheques, savings and other transactional accounts and including term deposits“, and that these are considered “in-scope for pre-positioning”:

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The OBR further states that “The Implementation Plan is a key part of the documented evidence that pre-positioned arrangements to quickly close the bank, freeze a portion of customers’ claims to meet potential losses, and reopen the next business day and continue banking services, are in place”:

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The first requirement for “Pre-positioning” is stated as being “That the bank can be closed promptly at any time of the day and on any day of the week, freezing in full all liabilities and preventing access by customers and counterparties to their accounts”:

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…

New Zealand’s version of the FSB-directed bank “bail-in” regime appears even worse than the rest of the West.

Unlike the others, New Zealand does not even have the pretence of a “government guarantee” or “deposits insurance” scheme for small depositors.

From Voxy.co.nz –

“Bill English is proposing a Cyprus-style solution for managing bank failure here in New Zealand – a solution that will see small depositors lose some of their savings to fund big bank bailouts,” said Green Party Co-leader Dr Russel Norman.

“The Reserve Bank is in the final stages of implementing a system of managing bank failure called Open Bank Resolution. The scheme will put all bank depositors on the hook for bailing out their bank.

“Depositors will overnight have their savings shaved by the amount needed to keep the bank afloat.

“While the details are still to be finalised, nearly all depositors will see their savings reduced by the same proportions.

“Bill English is wrong to assume everyday people are able to judge the soundness of their bank. Not even sophisticated investors like Merrill Lynch saw the global financial crisis coming.

“If he insists on pushing through this unfair scheme, small depositors can be protected ahead of time with a notified savings threshold below which their savings will be safe from any interference.”

Dr Norman questioned the Government’s insistence on pursuing Open Bank Resolution when virtually no other OECD country uses it.

“Open Bank Resolution is unprecedented in the world. Most OECD countries run deposit insurance schemes which protect people’s deposits up to a maximum ranging from $100,000 – $250,000,” Dr Norman said.

“OBR is not in line with Australia, which protects bank deposits up to $250,000.

Unfortunately, all the “deposit insurance” schemes in the West are not worth the paper they are(n’t) written on.

Cleverly, the FSB’s new G20 “bail-in” regime reclassifies customer deposits as “equity” in the failing bank, or, in a new “bridging” bank (ie, “recapitalisation”). This makes the customer’s “stake” — formerly a deposit — in that “new” bank liable for forfeiture.

More on this in future posts.

New Zealand lawyers Buddle Findlay have a helpful explanation of the unique way the kiwi OBR scheme will work:

In practice what has happened in Cyprus is very similar to what the OBR Policy is asking New Zealand banks to preposition for here. In essence, as in Cyprus:

Deposits of up to an undetermined amount (called “the de minimis”) may be protected in a bank failure (or, as in Cyprus, potentially a banking system failure); and

Amounts over the de minimis can be frozen in whole or in part (the RBNZ call this the “haircut”) and these amounts are effectively used to absorb losses in the failed bank or, as in Cyprus, banks.

The table below shows how the freeze would work but picks a much lower de minimis balance than the €100,000 ultimately agreed as politically acceptable in Cyprus – which seems to be consistent with the RBNZ’s intentions to have a relatively low de minimis.

Buddle Findlay lawyers, New Zealand 'Open Bank Resolution' scheme (click to enlarge)

Buddle Findlay lawyers, New Zealand ‘Open Bank Resolution’ scheme (click to enlarge)

See also:

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

The Bank Deposits Guarantee Is No Guarantee At All

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Timeline For “Bail-In” Of G20 Banking System

14 Jul

This-Is-What-It-Feels-Like-To-Have-Your-Life-Savings-Confiscated-By-The-Global-Elite

How did it happen?

How did we come to a place where an unknown, unelected body of bankers and bureaucrats — chaired since its inception by former Goldman Sachs men — has duped the G20 heads of government into endorsing a scheme to “bail-in” the insolvent private sector banking system by stealing the savings of taxpayers?

Financial Stability Board: Key Attributes of Effective Resolution Regimes for Financial Institutions, October 2011 (click to enlarge)

Financial Stability Board: Key Attributes of Effective Resolution Regimes for Financial Institutions, October 2011 (click to enlarge)

How did we come to a place where the European Union, the UK, the USA, Canada, and now Australia and New Zealand, have all begun implementing a new regime for “addressing the problem” of “moral hazard” associated with government bail outs for “too-big-to-fail” financial firms — supposedly “without exposing the taxpayer to the risk of loss” — by stealing the savings of taxpayers?

FSB – G-SIFI, Nov 4, 2011 (click to enlarge)

FSB – G-SIFI, Nov 4, 2011 (click to enlarge)

Here is the timeline to date (click the links to verify original sources):

FEBRUARY, 1999 – Following recommendations by then President of the Deutsche Bundesbank (German central bank) and later the Vice-Chairman (2003-present) of the Board of Directors of the Bank for International Settlements (BIS), Hans Tietmeyer, G7 Finance Ministers and Central Bank Governors endorse the creation of a new body, the Financial Stability Forum (FSF). It is funded by the BIS, and based in Basel, Switzerland.

Former Goldman Sachs vice chairman and managing director, and now President of the European Central Bank (ECB), Mario Draghi, is appointed the first chairman of the FSF. Its stated purpose is “to promote stability in the international financial system“:

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mariodraghi

…

30 MAY, 2006 – Chairman and CEO of Goldman Sachs from 1999-2006, Henry “Hank” Paulson, appointed Secretary of the Treasury by George W. Bush. During his tenure at Goldman, it became a major player in the creation and sale of collateralised debt obligations (CDO’s), including subprime mortgage-backed securities ($135 billion from 2001-2007). A tax loophole introduced under former President George HW Bush enables Paulson to meet the conflict of interest preconditions for assuming a government position, by “divesting” most of his $700 million fortune in Goldman Sachs’ stock, tax-free.

During Paulson’s first 15 months as Secretary of the Treasury, Goldman Sachs sells $30 billion in toxic mortgage products to pension funds, foreign banks and other investors (including a 59% increase in 2006), and makes billions betting against its own products. In 2006 and 2007, as the housing bubble bursts, Goldman distributes $22.3 billion in year-end profit-sharing rewards to its 31,000 employees and $112 million in bonuses to Paulson’s successor, Lloyd Blankfein.

15 SEPTEMBER, 2008 – Lehman Brothers files for bankruptcy; credit crunch; stockmarket panic; Global Financial Crisis:

wide-lehman-bros-bldg-cp-55

bankruptcy-failure-collapse-of-Lehman-Brothers-US-investment-bank-20080915-worldwide-first-few-days-of-news-headlines-and-images-mainly-from-UK-perspective-10-DHD

…

21 SEPTEMBER, 2008 – On a Sunday, Goldman Sachs is authorised to change its investment bank status, and becomes a traditional bank holding company, thus making it eligible for bailout funds.

26 SEPTEMBER, 2008 – French President Nicholas Sarkozy says “we must rethink the financial system from scratch”.

29 SEPTEMBER, 2008 – USA’s House of Representatives rejects the $700 billion Wall Street bank bailout bill promoted by Secretary of the Treasury, Henry Paulson. Dow Jones Industrial Average (DJIA) index plummets 777 points:

2ED1-CB-DowFallsOver700

…

1 OCTOBER, 2008 – US House of Representatives agrees to “bail out” Wall Street’s too-big-to-fail (TBTF) banks, passing amended Emergency Economic Stabilization Act, including the Troubled Assets Relief Program (TARP) enabling the government to purchase up to $700 billion in “toxic assets” such as mortgage-backed securities (derivatives) from private sector banks. Despite being a prime cause of the subprime meltdown, Goldman Sachs is the largest individual recipient of public funds ($12.9 billion) from the bailout of insurance giant, AIG, makes $2.9 billion from “proprietary trades” on its own AIG account, and receives a further $10 billion directly from the US Treasury as an “investment” in preferred stock:

g5npr8cjiyk9pn89

…

7 OCTOBER, 2008 – World Bank President Robert Zoellick calls for “a new multilateral network for a new global economy”, says that “We will not create a new world simply by remaking the old”.

13 OCTOBER, 2008 – British Prime Minister Gordon Brown says “We must create a new international financial architecture for the global age”, and that “We are proposing a world leaders’ meeting in which we must agree the principles and policies for restructuring the financial system across the globe”.

15 NOVEMBER, 2008 – First ever summit meeting for heads of government of the Group of Twenty (previously, a G20 summit of Finance Ministers and Central Bank Governors held since 1999). Titled the “Leaders Summit on Financial Markets and the World Economy”, the Washington Summit agrees on an “Action Plan” for financial market reform. It includes an expansion of the Financial Stability Forum to include emerging countries such as China:

Los-Cabos-g20summit

…

2 APRIL, 2009 – G20 London Summit Declaration on Strengthening the Financial System gives the freshly renamed Financial Stability Board (FSB) a “broadened mandate” and “enhanced capacity”:

FSB_broadenedmandate

…

8 NOVEMBER, 2010 – FSB report to the G20 Progress since the Washington Summit on the Implementation of the G20 Recommendations for Strengthening Financial Stability states that “Good progress has been made in defining a policy framework to address the moral hazard risks posed by systemically important financial institutions (SIFIs)”, and that “The FSB is submitting to the G20 Seoul Summit a set of recommendations and timelines for implementation of this framework”:

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Within the “recommendations”, for the first time the spectre of “bail-in” of banks is formally (though blink-and-you-miss-it briefly) mentioned —

“…higher loss absorbency could be drawn from a menu of viable alternatives and could be achieved by a combination of capital surcharges, contingent capital and bail-in debt“:

FSB_Update_bail-in

…

11-12 NOVEMBER, 2010 – G20 Seoul Summit endorses “the policy framework, work processes and timelines proposed by the FSB to reduce the moral hazard risks posed by systemically important financial institutions (SIFIs) and address the too-big-to-fail problem”, “without… exposing the taxpayers to the risk of loss”:

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…

4 NOVEMBER, 2011 – Former Goldman Sachs co-head of sovereign risk and managing director of investment banking, chairman of the Bank for International Settlements’ Committee on the Global Financial System, and Governor of the central Bank of Canada, Mark Carney, is appointed the new chairman of the Financial Stability Board. He replaces fellow Goldman Sachs alumnus and current European Central Bank President, Mario Draghi.

4 NOVEMBER, 2011 – FSB states that “the development of the critical policy measures that form the parts of this framework has now been completed. Implementation of these measures will begin from 2012“:

FSB_Implementation_from_2012

The FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions expressly identifies “bail-in” of banks as one of the “powers” that must be given to a single “Resolution authority” for each nation (G20) or jurisdiction (EU):

Financial Stability Board: Key Attributes of Effective Resolution Regimes for Financial Institutions, October 2011 (click to enlarge)

Financial Stability Board: Key Attributes of Effective Resolution Regimes for Financial Institutions, October 2011 (click to enlarge)

In the preamble, it is stated that one of the objectives is to make it possible for “unsecured and uninsured creditors to absorb losses”:

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Each nation or jurisdiction is required to set up a “Resolution authority”, which is to be “responsible for exercising the resolution powers over firms…”:

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The Resolution authority is to be given power to “transfer or sell assets and liabilities, legal rights and obligations, including deposit liabilities and ownership in shares, to a solvent third party,” … without consent:

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Key Attribute 3.3 clearly states that any transfer of a bank’s assets or liabilities (ie, deposits) by the Resolution authority “should not require the consent of any interested party or creditor to be valid”, and, that any such action will not be deemed a “default” of the bank’s legal obligations –

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…

25 JUNE, 2012 – Government of Cyprus requests bailout from the EU, due to losses in its banking system associated with the Greek debt crisis.

10 DECEMBER, 2012 – A joint paper by the Federal Deposit Insurance Corporation (USA) and the Bank of England (UK) titled Resolving Globally Active, Systemically Important, Financial Institutions states that “the authorities in the United States (U.S.) and the United Kingdom (U.K.) have been working together to develop resolution strategies that could be applied to their largest financial institutions”:

Screen shot 2013-07-14 at 2.33.54 PM

FDIC and BoE: Resolving Globally Active, Systemically Important, Financial Institutions, December 2012 (click to enlarge)

FDIC and BoE: Resolving Globally Active, Systemically Important,
Financial Institutions, December 2012 (click to enlarge)

It further identifies that “This work has taken place in connection with the implementation of the G20 Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions”:

FDIC and BoE: Resolving Globally Active, Systemically Important, Financial Institutions, December 2012 (click to enlarge)

FDIC and BoE: Resolving Globally Active, Systemically Important,
Financial Institutions, December 2012 (click to enlarge)

The paper explains that its focus is “the application of ‘top-down’ resolution strategies that involve a single resolution authority applying its powers to the top of a financial group”, and how such a strategy could be implemented “for a U.S. or a U.K. financial group in a cross-border context”:

FDIC and BoE: Resolving Globally Active, Systemically Important, Financial Institutions, December 2012 (click to enlarge)

FDIC and BoE: Resolving Globally Active, Systemically Important,
Financial Institutions, December 2012 (click to enlarge)

With regard to the USA, it explains that “the strategy has been developed in the context of the powers provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010“, and that such a strategy would “assign losses to shareholders and unsecured creditors“ (meaning, bank depositors):

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With regard to the UK, it explains that “the strategy has been developed on the basis of the powers provided by the U.K. Banking Act 2009 and in anticipation of the further powers that will be provided by the European Union Recovery and Resolution Directive“, and that the strategy would “involve the bail-in (write-down or conversion) of creditors at the top of the group in order to restore the whole group to solvency”:

FDIC and BoE: Resolving Globally Active, Systemically Important, Financial Institutions, December 2012 (click to enlarge)

FDIC and BoE: Resolving Globally Active, Systemically Important,
Financial Institutions, December 2012 (click to enlarge)

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The paper expressly identifies the origin of the “framework” for the bail-in strategy as being the FSB —

“It should be stressed that the application of such a strategy can be achieved only within a legislative framework that provides authorities with key resolution powers. The FSB Key Attributes have established a crucial framework for the implementation of an effective set of resolution powers and practices into national regimes”:

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…

14 MARCH, 2013 – Reserve Bank of New Zealand releases draft Open Bank Resolution policy, which includes “bail-in” for failing banks using depositors’ money.

16 MARCH, 2013 – Cypriot Government agrees to EU-imposed conditions for receiving bail out funds, terms which include “bail-in” of Cypriot banks using depositors’ savings.

Cyprus is widely seen as a template for similar actions throughout the EU and the world. Forbes magazine states that “A new strategy has been unveiled around the world, with the first test run in Cyprus. Despite early denials, the ‘bail-in’ strategy for insolvent banks has already become official policy throughout Europe and internationally as well.”

21 MARCH, 2013 – Canadian Government’s Economic Action Plan 2013 states that “The Government proposes to implement a ‘bail-in’ regime for systemically important banks”, aimed at recapitalising failing banks by “the very rapid conversion of certain bank liabilities into regulatory capital”. It further states that “This will reduce risks for taxpayers”:

Canada Budget 2013 Economic Action Plan, March 21, 2013, page 145 (click to enlarge)

Canada Budget 2013 Economic Action Plan, March 21, 2013, page 145 (click to enlarge)

…

14 MAY, 2013 – Australian Government Budget 2013-14 Portfolio Budget Statement for the Australian Prudential Regulation Authority identifies implementation of the FSB-directed bank bail-in regime as a key strategic objective for 2013-14 —

“consolidate the prudential framework by enhancing prudential standards where appropriate, in line with the global reform initiatives endorsed by the G20 and overseen by the Financial Stability Board“:

page 134, Portfolio Budget Statements, Australian Prudential Regulation Authority, Australian Government Budget 2013-14, 14 May 2013 (click to enlarge)

page 134, Portfolio Budget Statements, Australian Prudential Regulation Authority, Australian Government Budget 2013-14, 14 May 2013 (click to enlarge)

…

20 MAY, 2013 – The European Parliament’s Economic and Monetary Affairs committee issues a press release stating that “The case in Cyprus showed how important it is to have clear procedures for making shareholders, bondholders and ultimately depositors foot the bill”.

Bank of England deputy governor Paul Tucker says that draft EU bank rescue laws would be a milestone towards “a global system”.

JUNE, 2013 – Reserve Bank of New Zealand releases its Open Bank Resolution (OBR) Pre-positioning Requirements Policy, stating that the OBR “provides the flexibility to assign losses to creditors“ (meaning, bank depositors):

Reserve Bank of New Zealand, Open Bank Resolution (OBR) Pre-positioning Requirements Policy, June 2013 (click to enlarge)

Reserve Bank of New Zealand, Open Bank Resolution (OBR) Pre-positioning Requirements Policy, June 2013 (click to enlarge)

In Definitions, the OBR states that “‘Customer account’, ‘customer liabilities’, or ‘customer liability accounts’ are unsecured liabilities of the bank represented by a range of products such as cheques, savings and other transactional accounts and including term deposits“, and that these are considered “in-scope for pre-positioning”:

Click to enlarge

Click to enlarge

The OBR further states that “The Implementation Plan is a key part of the documented evidence that pre-positioned arrangements to quickly close the bank, freeze a portion of customers’ claims to meet potential losses, and reopen the next business day and continue banking services, are in place”:

Click to enlarge

Click to enlarge

The first requirement for “Pre-positioning” is stated as being “That the bank can be closed promptly at any time of the day and on any day of the week, freezing in full all liabilities and preventing access by customers and counterparties to their accounts”:

Click to enlarge

Click to enlarge

…

27 JUNE, 2013 – The European Union agrees on “bail-in” rules as part of the Bank Resolution and Recovery Directive.

1 JULY, 2013 – Mark Carney appointed to a second term as chairman of the FSB; also becomes Governor of the Bank of England.

3 JULY 2013 – The Financial Times warns that the EU’s newly agreed ‘Bank Resolution and Recovery Directive’ “swings Europe from one extreme – a system laden with implicit government guarantees that protected bank creditors from bearing losses – to the other”, and “risks old-style bank runs”.

************

To be continued…

Observant readers will note that the G20 heads of government endorsed the FSB’s “recommendations” (Seoul, Nov 2010) a full year before the FSB actually completed their “framework”, and finally documented that the power to bail-in the banks using depositors’ savings would be a requirement (“Key Attributes…”, Nov 2011). Prior to this, the only reference to the possibility of bail-in (with no mention of depositors) was one obscure, and very brief, reference in the FSB’s 2010 “Progress…” report to the G20 Seoul Summit; the report on which the G20 leaders based their decision to formally endorse, and implement, the yet-to-be-completed FSB framework —

“…higher loss absorbency could be drawn from a menu of viable alternatives and could be achieved by a combination of capital surcharges, contingent capital and bail-in debt.”

Amidst all the celebrity shoulder-rubbing, champagne, caviar, and photo ops, I wonder how many of the G20 leaders actually read the document, much less noticed that tiny part.

Or — if any of them did — if any had the first clue what it meant.

See also:

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

But The Sheep Don’t Scatter: Banks Say “Sophisticated” Customers Have “Less Stable” Deposits

The Bank Deposits Guarantee Is No Guarantee At All

Think You’ve Got Cash In The Bank? Think Again

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But The Sheep Don’t Scatter: Banks Say “Sophisticated” Customers Have “Less Stable” Deposits

10 Jul

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Here is a shining example of bankers’ true attitude towards depositors.

In the Australian Prudential Regulation Authority (APRA) document titled ‘Implementing Basel III Liquidity Reforms In Australia’ (pdf here), the very important topic of “cash outflows” or “deposit run-off” is discussed at length.

Unsophisticated common people like you and me call it a “bank run”.

In the section titled ‘Other matters raised in submissions’, we learn that bankers consider the deposits of “financially sophisticated” customers to be “less stable” (my emphasis added):

4.2.1 Cash outflows

Retail and qualifying small and medium enterprises (SME) deposit run-off

Within the LCR [Liquidity Coverage Ratio], retail deposit balances are classified as either ‘stable’ or ‘less stable’. Stable deposit balances are those that are considered to have the lowest propensity to be withdrawn during times of stress…

Comments received

Submissions [from banks] suggested including client relationship characteristics, such as the term of a relationship, the number of products and the use of a relationship manager, to assist categorisation of the deposit. They also proposed that dormant accounts be classified as stable due to their expected inactivity in a stress event and that self-managed super fund (SMSF) deposits be eligible to be classified as stable deposits as the trustee overseeing the SMSF deposit account is not necessarily a financially sophisticated individual.

APRA - Implementing Basel III Liquidity Reforms in Australia, page 17

APRA – Implementing Basel III Liquidity Reforms in Australia, page 17

In other words, “financially sophisticated” people won’t be stupid enough to keep their money in the bank if a crisis looms on the horizon. Their deposits are “less stable”.

People who are “not necessarily financially sophisticated” will leave their money in the bank. Their deposits are “stable”.

Somewhat amusingly (to this blogger), the bankers want to classify the deposits of Self-Managed Super Fund trustees in the same “stable” category as “dormant” accounts. They consider SMSF trustees to be idiots — “not necessarily financially sophisticated individuals” — who won’t try to withdraw their money.

Under the new FSB-directed global regime agreed to by the G20 in 2010 — now being implemented by Australia, Canada, Europe, the UK and USA — just as in Cyprus, all “unsophisticated” bank depositors will get screwed overnight.

Or more likely, over weekend.

It is also worth noting the bankers’ views on internet access to bank accounts in a “crisis” (ie, possible bank run scenario):

A number of submissions objected to the inclusion of internet access as a criterion in the less stable deposit scorecard. These submissions argued that means of access was not a strong indicator of withdrawal propensity and it should be removed from the scorecard; instead, greater emphasis should be placed on deposit size as this was more consistent with ADI experience.

APRA: Implementing Basel III Liquidity Reforms in Australia

APRA: Implementing Basel III Liquidity Reforms in Australia, page 17

In other words, the banks are confident that your having internet access does not necessarily mean that you are more likely to get your money out in a crisis. Given the number of times our banks have mysteriously suffered from internet banking “outages” in recent years, I’m not surprised. It’s called “economic shock testing” (see Electro-Physics: The Theory Of Economic Warfare).

Do not be deceived by the smokescreen of the “government guarantee” for depositors.

As we have seen in The Bank Deposits Guarantee Is No Guarantee At All, Australia’s so-called “guarantee” for deposits up to $250,000 only provides for up to $20 billion in Federal (borrowed) money per bank — less than 1/10th of the amount that each of the Big Four has in (electronic) obligations to bank account depositors (ie, “creditors”).

Or should I say, it “only promises to provide for up to $20 billion…”.

There is no money actually set aside to “guarantee” any depositors.

As confirmed in the APRA document, page 15:

Fully guaranteed retail deposits

The revised Basel III liquidity framework includes an additional retail deposit category for deposits that are fully insured under a pre-funded deposit insurance scheme. The deposit insurance scheme in Australia, the Financial Claims Scheme (FCS), is not pre-funded and, as such, this category is not relevant for domestic deposits.

APRA, 'Implementing Basel III Liquidity Reforms In Australia'

APRA, ‘Implementing Basel III Liquidity Reforms In Australia’

You have been warned.

Australian banks not only have ten times more in deposit obligations than the government has guaranteed promised to provide as insurance for each bank’s eligible deposits.

As of March 2013, the banks also have a new record $21.5 Trillion in Off-Balance Sheet “business” that is mostly derivatives; an increase of $2.5 Trillion in the March quarter alone, including a $2.2 Trillion increase in Interest Rate derivative contracts:

Screen shot 2013-07-10 at 6.24.32 PM

In the APRA document on implementing the Basel III bank liquidity reforms, we learn that the “cash outflow rate” for derivatives positions will be rated at 100 per cent of their measured value:

Additional derivatives risks

The revised framework includes a number of additional collateral outflow categories designed to ensure that risks associated with derivative positions are correctly captured in the LCR. The cash outflow rate for these categories is 100 per cent of the measured value.

APRA: Implementing Basel III Bank Liquidity Reforms, page 16

APRA: Implementing Basel III Liquidity Reforms In Australia, page 16

… while derivatives that are (supposedly) “secured” by so-called “High Quality Liquid Assets” — limited to cash; central bank reserves that “can be drawn down in times of stress”; and “marketable securities representing claims on or claims guaranteed by sovereigns, quasi-sovereigns, central banks and multilateral development banks, that have undoubted liquidity, even during stressed market conditions, and that are assigned a zero risk-weight under the Basel II standardised approach to credit risk” — these will have a cash outflow rate deemed to be zero per cent:

Derivatives secured by HQLA

The revised framework has clarified that where a derivative cash flow is secured with HQLA1, a cash outflow rate of zero per cent is to be applied.

APRA: Implementing Basel III Bank Liquidity Reforms, page 16

APRA: Implementing Basel III Liquidity Reforms In Australia, page 16

Remember that the cash outflow rate is determined by the perceived risk of it actually “flowing out”.

In the case of the form of “liquidity” known as “deposits”, APRA says (page 16) that “Stable deposit balances are those that are considered to have the lowest propensity to be withdrawn during times of stress and, hence, receive a low three or five per cent cash outflow rate. Less stable deposits are considered to have a higher propensity to be withdrawn and as a result, depending on deposit characteristics, receive a 10 per cent or higher cash outflow rate.”

So, in an actual crisis situation, just how much of the banks’ $21.5 Trillion in Off-Balance Sheet “business” will have a “cash outflow rate” of 100 per cent, and how much will have a cash outflow rate of zero per cent?

Who knows.

But one thing I do know.

I’d not want to have any of my money in a bank on the day — make that, the weekend — when we all find out.

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EU Confirms Plan For Cyprus-Style Theft of Bank Deposits

6 Jul

As warned here repeatedly…

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

Federal Reserve Governor Confirms – Bank Depositors Will Be Cyprused

Growing Political Deception On Bank Deposits Theft

The Bankers’ Net Is Closing

Federal Reserve Says Bank Bail-Ins Coming To The USA

… the internationalist banksters’ plan to set up a global regime for “resolution” of failing banks, wherein governments will give themselves free reign to “bail-in” the banks using depositors’ savings, is now slowly but surely being enacted by governments worldwide.

From The Telegraph (UK):

EU makes bank creditors bear losses as Cyprus bail-in becomes blue-print for rescues

New European Union “bail-in” rules to impose the losses of failed banks on shareholders, bondholders and some large depositors were agreed early this morning by Europe’s finance ministers.

…Jeroen Dijsselbloem, the chairman of the Eurogroup of finance ministers, hailed the agreement as a major step towards a “banking union” and away from state funded aid to recapitalise or bailout troubled banks across Europe.

…Greg Clark, the financial secretary to the Treasury, declared that Britain was happy with the new rules after securing concessions allowing governments flexibility on how to tailor bank “resolution” to national circumstances and existing British arrangements on banking levies.

…Under the deal, after 2018 bank shareholders will be first in line for assuming the losses of a failed bank before bondholders and certain large depositors. Insured deposits under £85,000 (€100,000) are exempt and, with specific exemptions, uninsured deposits of individuals and small companies are given preferred status in the bail-in pecking order for taking losses.

It is most important to recall what we have shown previously.

Do not be fooled into believing that, because Australia’s government has “guaranteed” (ie, insured) bank deposits up to $250,000, that this means your savings are safe, and that a failing Aussie bank will not be “bailed-in” using your money.

The government’s “guarantee” is limited, to just $20 billion per failed bank.

That’s less than one-tenth of the total amount of customer deposits — digital bookkeeping entries — actually “held” by Australian banks.

(see The Bank Deposits Guarantee Is No Guarantee At All )

To the best of my knowledge, Australia’s politicians have not yet begun to legislate the new, FSB-mandated and G20-agreed bank “bail-in” regime here.

But when they do, your savings will be exposed to confiscation.

Just as intended:

Earlier on Monday, Bank of England Deputy Governor Paul Tucker said the EU law on bank recovery and resolution would be a milestone towards a global system.

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Federal Reserve Says Bank Bail-Ins Coming To The USA

26 Jun
Click to enlarge

Click to enlarge

On April 1st, this blog broke the full story of how G20 Governments All Agreed To Cyprus-Style Theft Of Banks Deposits … In 2010.

In recent days, numerous alternate media outlets have reported that Federal Reserve board member Jeremy Stein has confirmed this at an IMF-sponsored conference.

From Anglo Far East:

Please find a review of some data from a recent speech by a central banker that reinforces the rapid approach of “bail-ins”.

Link to download PDF of Jeremy Stein speech

The speech by Federal Reserve Board Member Jeremy Stein at an IMF-sponsored conference focused on “too big to fail” (TBTF) banks and “systemically important financial institutions” (SIFIs).

Stein said: “First, and most obviously, one goal is to get to the point where all market participants understand with certainty that if a large SIFI were to fail, the losses would fall on its shareholders and creditors, and taxpayers would have no exposure.”

And from gold proponent Jim Sinclair:

Bail-in is coming faster then we know. For god’s sake protect yourself. Come to the Q&A.

Governor Jeremy C. Stein
At the “Rethinking Macro Policy II,” a conference sponsored by the International Monetary Fund, Washington, D.C.
April 17, 2013

“First, and most obviously, one goal is to get to the point where all market participants understand with certainty that if a large SIFI (Significantly Important Financial Institutions) were to fail, the losses would fall on its shareholders and creditors……”

It is worth reviewing this blog’s report of April 1st for the full details of the BIS-funded, FSB-directed plan to steal your bank deposits when our banks begin to go under.

To “enable authorities to resolve failing financial firms in an orderly manner without exposing the taxpayer to the risk of loss.”

Conveniently ignoring that bank deposit holders are taxpayers too.

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