So you think the Cyprus 'haircut' was a 'one off'?

[ellal]

SIGNATORIES to a document which proposes that creditors of financial organizations, the depositors, carry responsibility to "bail in" bankrupt organizations.

Members of the Cross-border Bank Resolution Group
Swiss Financial Market Supervisory Authority
Federal Deposit Insurance Corporation Banco Central de la República Argentina National Bank of Belgium
Commission bancaire, financière et des assurances, Belgium Banco Central do Brasil
Office of the Superintendent of Financial Institutions, Canada Commission Bancaire, France
Deutsche Bundesbank
Bundesanstalt für Finanzdienstleistungsaufsicht, Germany Banca d'Italia
Bank of Japan
Financial Services Agency, Japan
Commission de Surveillance du Secteur Financier, Luxembourg De Nederlandsche Bank
Banco de España
Sveriges Riksbank
Swiss National Bank
Swiss Financial Market Supervisory Authority
Bank of England
Financial Services Authority (Now replaced by other departments)
Board of Governors of the Federal Reserve System Federal Reserve Bank of New York
Office of the Comptroller of the Currency
Office of Thrift Supervision
Federal Deposit Insurance Corporation
European Commission European Central Bank (ECB)
Financial Stability Board
Offshore Group of Banking Supervisors
Bank for International Settlements
Financial Stability Institute
Secretariat, Basel Committee on Banking Supervision


The mattress looks a safer bet...

 

[AronSearle]

I'm very mixed on this.

Certainly in the case of Cyprus I think it is wrong, because existing obligations should matter, I don't think you can change the rules on the fly.

But no amount of regulation is going to make banking 100% safe (some of the bank failures where straightforward banking, not "casino" banking, that no regulation past, present or proposed would have avoided) , it has to be a relationship between all parties.

All banking carries a risk (where do you think that interest you get paid comes from), too many people stick money in whatever bank offers the best interest rates with no thought or idea as to how solvent that bank is.

In other words, you hear of reckless banking, but why not reckless saving?

The only safe bank account would be one where you are paid no interest, and pay a small fee for them to securely hold your money (not use it).

 

[JohnD]

a document

what is this unspecified document, and where did you see it?

you have obviously copied and pasted the list from something on the internet. What?

 

[AronSearle]

Even if the document is bullshit, I think the writing is on the wall, though it may only apply to euro countries.

Too many politicians too desperate for money to avoid a necessary correction, the wrong reason for such a change of course, but then what do you expect.

 

[ellal]

a document

what is this unspecified document, and where did you see it?

you have obviously copied and pasted the list from something on the internet. What?

It is a 'cross-border agency' (Basel Committee on Banking Supervision, set up by the G20) report...

It was organised well before the Cyprus 'haircut', so it is a 'template' for a gradual asset stripping of 'debtor' nations - of which we are one of the worst!

 

[JohnD]

what is this unspecified document, and where did you see it?

you have obviously copied and pasted the list from something on the internet. What?


you aren't going to show us your link, then?

Is it a hoax?

 

[ellal]

what is this unspecified document, and where did you see it?

you have obviously copied and pasted the list from something on the internet. What?


you aren't going to show us your link, then?

Is it a hoax?

Lost the ability to search for yourself?

It's not that tricky...

linky linky

 

[JohnD]

that's interesting. You found a document published in March 2010.

Which bit were you quoting?

I started with recommendation 1

"Recommendation 1: Effective national resolution powers
National authorities1 should have appropriate tools to deal with all types of financial institutions in difficulties so that an orderly resolution can be achieved that helps maintain financial stability, minimise systemic risk, protect consumers, limit moral hazard and promote market efficiency. Such frameworks should minimise the impact of a crisis or resolution on the financial system and promote the continuity of systemically important functions. Examples of tools that will improve national resolution frameworks are powers, applied where appropriate, to create bridge financial institutions, transfer assets, liabilities, and business operations to other institutions, and resolve claims"

seems fair enough

then a few more

Recommendation 2: Frameworks for a coordinated resolution of financial groups
Each jurisdiction should establish a national framework to coordinate the resolution of the legal entities of financial groups and financial conglomerates within its jurisdiction.

Recommendation 3: Convergence of national resolution measures
National authorities should seek convergence of national resolution tools and measures toward those identified in Recommendations 1 and 2 in order to facilitate the coordinated resolution of financial institutions active in multiple jurisdictions.

Recommendation 4: Cross-border effects of national resolution measures
To promote better coordination among national authorities in cross-border resolutions, national authorities should consider the development of procedures to facilitate the mutual recognition of crisis management and resolution proceedings and/or measures

OK so far

Recommendation 5: Reduction of complexity and interconnectedness of group structures and operations
Supervisors should work closely with relevant home and host resolution authorities in order to understand how group structures and their individual components would be resolved in a crisis. If national authorities believe that financial institutions’ group structures are too complex to permit orderly and cost-effective resolution, they should consider imposing regulatory incentives on those institutions, through capital or other prudential requirements, designed to encourage simplification of the structures in a manner that facilitates effective resolution.

Recommendation 6: Planning in advance for orderly resolution
The contingency plans of all systemically important cross-border financial institutions and groups should address as a contingency a period of severe financial distress or financial instability and provide a plan, proportionate to the size and complexity of the institution’s and/or group’s structure and business, to preserve the firm as a going concern, promote the resiliency of key functions and facilitate the rapid resolution or wind-down should that prove necessary. Such resiliency and wind-down contingency planning should be a regular component of supervisory oversight and take into account cross-border dependencies, implications of legal separateness of entities for resolution and the possible exercise of intervention and resolution powers.

Recommendation 7: Cross-border cooperation and information sharing
Effective crisis management and resolution of cross-border financial institutions require a clear understanding by different national authorities of their respective responsibilities for regulation, supervision, liquidity provision, crisis management and resolution. Key home and host authorities should agree, consistent with national law and policy, on arrangements that ensure the timely production and sharing of the needed information, both for purposes of contingency planning during normal times and for crisis management and resolution during times of stress.

Recommendation 8: Strengthening risk mitigation mechanisms
Jurisdictions should promote the use of risk mitigation techniques that reduce systemic risk and enhance the resiliency of critical financial or market functions during a crisis or resolution of financial institutions. These risk mitigation techniques include enforceable netting agreements, collateralisation, and segregation of client positions. Additional risk reduction benefits can be achieved by encouraging greater standardisation of derivatives contracts, migration of standardised contracts onto regulated exchanges and the clearing and settlement of such contracts through regulated central counterparties, and greater transparency in reporting for OTC contracts through trade repositories. Such risk mitigation techniques should not hamper the effective implementation of resolution measures (cf. Recommendation 9).

Recommendation 9: Transfer of contractual relationships
National resolution authorities should have the legal authority to temporarily delay immediate operation of contractual early termination clauses in order to complete a transfer of certain financial market contracts to another sound financial institution, a bridge financial institution or other public entity. Where a transfer is not available, authorities should ensure that contractual rights to terminate, net, and apply pledged collateral are preserved. Relevant laws should be amended, where necessary, to allow a short delay in the operation of such
termination clauses in order to promote the continuity of market functions. Such legal authority should be implemented so as to avoid compromising the safe and orderly operations of regulated exchanges, CCPs and central market infrastructures. Authorities should also encourage industry groups, such as ISDA, to explore development of standardised contract provisions that support such transfers as a way to reduce the risk of contagion in a crisis.

Recommendation 10: Exit strategies and market discipline
In order to restore market discipline and promote the efficient operation of financial markets, the national authorities should consider, and incorporate into their planning, clear options or principles for the exit from public intervention.

There's a lot to read. Where's your bit? I can't find the word "depositors" in those recommendations.

You claim the document "proposes that creditors of financial organizations, the depositors, carry responsibility to "bail in" bankrupt organizations" but I can't find it. Did you find it yourself, or were you looking at some other interweb rumour?

 

[ellal]

I suggest you look a lot further down...
And the list is on the last page.

 

[ellal]

Oh, and just in case you think it's an isolated document - here's one signed up country who is at least being open about it:

http://canadiantimes.ca/ct2/index.p...allow-banks-to-confiscate-customer-s-deposits

On March 21st, 2013, Prime Minister Stephen Harper had his Finance Minister Jim Flaherty present their 2013 Budget that included a “Bail-In Regime” on page 145. This clause will allow banks to convert liabilities into capital in times of need. The recent events in Cyprus, coupled with the G20 agreement in Mexico City-2012, suggest that this so called bail-in scheme may be used to plunder the savings of Canadians.

Bail-in...
G20...
Cyprus...
Savings...

Ringing any bells yet?

 

[JohnD]

I have looked, but I could not find what you claimed "proposes that creditors of financial organizations, the depositors, carry responsibility to "bail in" bankrupt organizations".

Can you?

If so, please quote it.

I reckon you've been speading a hoax.

Rumors on some Canadian website of what might, or might not, happen are of no interest to me.

 

[ellal]

Just in case you haven't found it yet...

Page 43...

"Losses should be allocated among shareholders and other creditors, where possible"

Guess what most 'creditors' are....

Depositors !

 

[ellal]

I have looked, but I could not find what you claimed "proposes that creditors of financial organizations, the depositors, carry responsibility to "bail in" bankrupt organizations".

Can you?

If so, please quote it.

I reckon you've been speading a hoax.

Really?

Well actually I don't give a f*ck whether you think it's a hoax...

I bet those cypriots who ignored the 'hoax' that preceded their 'bail-in' are wishing they'd have taken heed of the warnings...

 

[ellal]

Rumors on some Canadian website of what might, or might not, happen are of no interest to me.

An update to another bit of proof...lol

Hey, you can take it as no 'interest to you', but when you get a 'haircut' I'll be p*ssing myself laughing at you...

Because you have been forewarned!

 

[JohnD]

The document you claim to quote is full of steps to be taken to protect depositors. Read the document carefully and you will see it uses the term "depositors and other creditors " i.e. it does not include depositors as being "other creditors."

You're looking at the bit that says:

"National authorities should adopt crisis management and resolution strategies that reduce moral hazard by minimising public expenditures. Losses should be allocated among shareholders and other creditors, where possible; and private sector resolutions rather than public ownership should be facilitated. Where temporary public ownership is necessary, authorities should seek to return assets to private ownership and management as soon as possible. At the time of public intervention, national authorities should seek to develop public understanding about the amount of fiscal support that may be necessary, estimates of the time horizon for intervention, risk sharing arrangements and the possible losses borne by the taxpayers.
Government rescue operations should include careful consideration of exit strategies. An abrupt or too hasty exit from public intervention could impair the financial and operational condition of a troubled financial institution. A too lengthy exit could lead to moral hazard problems. The time horizons of exit strategies and the risks arising from the termination of public intervention should be well balanced."

But there are heaps more which I see you're ignoring about protection of depositors. Here are the relevant parts:

"An effective resolution regime would allow the authorities to act quickly to maintain financial stability, preserve continuity in critical functions and protect depositors"

"This transfer was funded by the FSCS and the UK government, which now stand in the place of the transferred depositors as creditors of KSF. The UK government also announced that it would protect retail customers of KSF for claims over the compensation limits of the FSCS."

"On 20 October 2008, the Finnish Financial Supervisory Authority announced that Finnish Banks were financing the EUR 100 million payback to the depositors of Kaupthing Finland."

"Shortly before the collapse of the bank, the Isle of Man authorities had raised the level of protection of the Depositors’ Compensation Scheme from GBP 15,000 to GBP 50,000. An estimated 10,000 depositors had about GBP 840 million in KSF. Only about GBP 100 million of their funds remain in the Isle of Man. More than GBP 590 million of the bank’s assets were frozen in the United Kingdom."

"National resolution authorities will seek, in most cases, to minimise the losses accruing to stakeholders (shareholders, depositors and other creditors, taxpayers, deposit insurer) in their specific jurisdiction to whom they are accountable"

"For financial institutions in which the public purse or a public or quasi-public fund is often called upon for institutional support or protection of certain creditors (at a minimum, insured depositors), the likelihood of the application of measures that seek to protect local interests and stakeholders is increased by the public and policy pressure to allocate financial resources in a way which reduces the burden for their own taxpayers"

"A commitment of national jurisdictions to undertake the necessary legal reforms, which may require a harmonisation of national rules governing cross-border crisis management and resolutions, including rules on core issues such as a common definition for bank insolvency, avoidance powers, minimum rights and obligations of creditors including depositors, treatment of intra-group claims, ranking of claims, rights to set-off and netting, and the treatment of certain financial contracts, submission and admission of claims, and distributions to creditors"

"

A process to ensure the equitable treatment of the creditors, depositors, counterparties and shareholders of group entities, regardless of the jurisdiction in which they are located, which would require careful assessment of the provision of intra-group financing;

Harmonised and mutually compatible deposit insurance level to ensure the equal treatment of all depositors of the entities; "

"For instance, the authorities may require that institutions establish clear lines between deposit-taking and other banking operations, so that the depositor book can be easily transferred to another institution in times of failure with minimum disturbance to the confidence of depositors."

"The operation of national regulatory, corporate and insolvency regimes in home/host jurisdictions including the scope of potential ring fencing measures, the treatment of intra-group claims, safe harbour provisions for financial contracts, the treatment of depositors and other creditors under the relevant resolution frameworks, and market, regulatory and legal constraints that may require early disclosure of an impending crisis;"

"Critical assumptions on measures that may be taken by domestic and foreign authorities in a crisis, such as ring fencing, the treatment of depositors and other creditors and the treatment of financial contracts, should be verified with relevant foreign authorities. "

"Critical assumptions on the potential measures that may be taken by national authorities in a crisis, such as ring fencing or territorial resolution measures, the treatment of depositors and other creditors, the treatment of financial market contracts. Where practicable, the potential responses of national authorities in a crisis should be discussed with those authorities"

"However, host supervisors that are unable to obtain that information from the reluctant authorities may be more, not less, inclined to take action to protect local depositors and creditors and ring fence assets"

"An effective resolution regime would allow the authorities to act quickly to maintain financial stability, preserve continuity in critical functions and protect depositors. At the same time, an effective regime would maintain market discipline by holding to account, where appropriate, senior managers and directors and imposing losses on shareholders and, where appropriate, other creditors"