Topic: Are Bail-ins possible in Europe? - page 2. (Read 2913 times)

Lets go back to the beginning.  When some banks got into trouble a few years back, governments bailed them out.  They poured in tax payers money to shore up the balance sheet so that the banks where solvent.  This was widely considered a bad thing, as it rewarded the banks for years of poor risk management (thats the raw nub, alot of other opinion is political and i'd rather leave that), and the presented us with a moral hazard. 

We have a banking system that assumes (because it is told so) that they will backed by nation governments if they get into difficulty.  The object of that government backing is actually to assure the population their deposits are safe, but it had come to be extended to the whole of the bank beyond depositors.  So banks took risks they wouldn't otherwise have done, lent money to those they shouldnt, or underpriced debt etc.

So the solution, to instruct the banks that actually that's not how its going to be. The depositors will be secured, as was always intended to be the case, but if they get into difficulty the first port of call isnt the government/central banks, but the owners of the bank and its principle debt, bondholders.  They reap the rewards, so they have to bail-in their assets to shore up the balance sheet.  by converting their debt to equity, or by buying more equity in a rights issue, they refund the balance sheet to remain solvent.  Its all about the balance sheet.

Well and isnt the whole idea of the bail-in the fact that you "actually" really didnt lose the money, that you just voila... become a shareholder of the bank? (when in reality yeah, you lost the money, and they gave you some stupid paper claiming that you own a share in the bank now...)

some of us doesnt understand the topic, but it might be me, could someone clarife that?

I agree - there would probably be plenty of people who (a) didn't figure it out, (b) were out of the country, (c) stupid or uninformed, or something else who wouldn't move their accounts under the 100k limit, but in the US in 2008, there were articles in the media about getting your balance under the FDIC limit.  So even if only 50% of the people did it, it would devastate their plans for funding and I bet there would be way more than that.

The guaranteed deposits are only guaranteed until they decide they have no other choice and then they are no longer guaranteed.

Will they go after the people under 100K Euro?  If they feel that they need the money and have no other way, then yes.  Will it happen?  I don't know, I don't think anyone does, but the IMF/Central Banks etc float ideas for a reason and if they can't print (inflate) their way out of the problems, then they'll use "other means".  The US has the ability to print and might think that will solve all their problems, but many countries don't and that is for a good reason - it is irresponsible and immoral to foist your debts off on future generations.

Dont think you quite understand the details of a bail-in.  They wont "go after" the deposits under €100k because they've guaranteed those deposits.  Deposits above €100k might be subject to a haircut, if needed, but there would have to be a very bad situation for a bank to be that distressed.  The whole point of the bail-in is for bondholders and shareholders to take the burden of any problem (since they take the benefits of gains made from risks that come good), so that the deposits are secured.  

The situation in Cyprus is a poor example as they didn't really know what they were doing/supposed to do/could do legally (effectivly they breached the  € rules on their first "plan" by ignoring implicit security of small depositors).  A better reference would be Cooperative Bank in the UK, that is how bail-ins are supposed to work.

Bail-ins: banks close Friday, surprise bail-ins announced Friday night, banks reopen late the following week and your balance is only 80% of what it was before.

Wealth tax: banks/markets close Friday.  Surprise Wealth tax announced based on closing prices that day and are due within 60-90 days (or at the end of the quarter) with the 10% taken right from your account that weekend.

Will it happen soon? Probably not, but these trial balloons are used for some time before it does so they can see what they can get away with and get people accustomed to the idea and terms - "oh that old idea, we've been hearing about it for 3 years  now, so it must be something we need to do."

Thats a great post, some posts are good because i cant figure everything (regrettably) myself :-(.

I didnt realize that majority of the people will move their funds in one bank account under 100 K euro, so above that limit, there wont be anything to confiscate... On the other hand dont underestimate the stupidity of people :-), on the other hand again, when you have over 100 K i euro, theres a reasonable chance, you are not stupid :-).

So do you guys think that they will go for money even under the 100 K euro? Well in that case i think that they would confiscate it all in one turn (to prevent the run on other banks , that are in a bad shape now, but still ok, but might fail in horizont of few months).

Also, how would the 10 % wealth tax played out?

- Is it for the entire (western) world? Or just USA? Just the real in debt problem countries, only eurozone (EU countries which pay with euro), only EU etc.?
- What do you think would be the timeframe? Would it be a short period (like 1.1.2015 theres an announcment that all people with nerth wealth will have to pay 10% until 31,1,2015 (only in a month), or will it be a londer period (pay your share of wealth tax, you have one year to do so)...? Because when theres a short time period you might not pay it (the tax) because you wotn get the cash so quickly. When theres a logn time period, you might try to cheat the tax somehow...

So what do you think, how would it play out?

In Cyprus they initially planned it in everyone, until there was outrage. I dare say in Cyprus there are very few people keeping over 100k Euros in any one bank now. Likewise if I were in a country and started hearing about bank issues, I would immediately get below the limit.

Then what? Most people do that because they aren't dumb and that means that everyone ends up paying since there is not enough money above the limit to steal, I mean confiscate, I mean, some word that means steal, bit sounds better. :-)

The global financial system is a mess and overdue for collapse for many years. The fact that it hasn't collapsed yet is because the (central) banks are able to create currency out of thin air and pump the economy (selected financial institutions and big corporations) while the People gets the inflation part of it in food prices and home bills. On the other hand all big western corporations has almost ceased their domestic production and export it to the East while smaller businesses cannot compete with cheap (for the time being at least) eastern labor and thus consequently fall out of the game.

But all things being finite (not sure about human stupidity though) the game will come to its end eventually. The problem is nobody knows the exact time of the next big black swan effect. All we can do is make our own decisions about our investments and I'm not talking about financial aspect only. Oh yeah, and stop voting! Politicians are all part of the same scam. Their job is to write favourable laws... yeah you guessed it right, they're not in the best interest of the People. So, stop voting and maybe there will be some peaceful change of scenery when the voting participation fall below 10% or so. Well they will probably ignore that signal as well and write some new laws making elections legitimate event at those ridiculous levels.

After all said I cannot imagine a very nice conclusion of the drama we're living in but I still hope I'll be proven wrong. Maybe we can overtake them on the right with cryptos or something. Who knows?

BR

100%. look in the past (zyprus, great depression etc) to see the future.

So about Bailins...

- I think its the "last step", nobody will try it, until its really necessary.
- They might try it once or twice again in some "major country" (in eurozone) and be really worried
- If they tried it for the (i dont know) third time, they will do it in a big scale (for example in ALL troubled banks in eurozone, or european union in general)
Because with each additional bailin, the faith in banks starts to crumble a LOT (!) and theres a big risk of "global" run on banks which nobody can afford. So i think one or twice more, and then suddenly in ALL (troubled) BANKS together at one moment (to prevent run on banks), and say that "its done" all banks are safe now. This would really hurt the faith in banking, but still it wouldnt really destroy it (like a global run on banks probably would).
So we might see 1 or at most 2 bailins in little more important countries (than Cyprus was) and then it goes BIG.
-Bailins apply for ammount ONLY (?) above 100 000 EUR (the smaller ones are insured).

Do you agree with this, or did i miss something?

Should anybody with less than 100 K EUR in a bank account be worried about Bailins?

Also this scenario would be good for the price of bitcoin, maybe a BIG time. Altough if there would be applied also capital controls (like in cyprus when you cannot deposit more then 100 EUR a day for example), and they probably would be in place to manage the panic, its a question how much money would flow in bitcoin since majority of paper money is on bank accounts, and when they are frozen or terrible slowed down, you dont have the money to diversife savings into bitcoin...

whats your take on this?

Yeah i saw that thread but will have to read through it still

"Yes, but I would prefer if we call it what it is. Confiscation of private property, robbery, stealing from private bank accounts etc."

Well i wouldnt really call that, becuase itrs not "true"= not correct for the "masses". When anybody says anything like this, its get dismissed by the "ordinary" people because it just doesnt sound possible, use correct terms, this is NOT one of them (even if in the burden core it is true)
You watch too much max keiser.

Article about this:

http://www.forbes.com/sites/timworstall/2013/10/23/why-the-imfs-10-wealth-tax-simply-will-not-work/
also
http://www.forbes.com/sites/billfrezza/2013/10/15/the-international-monetary-fund-lays-the-groundwork-for-global-wealth-confiscation/

Also i would like to add, according to the official page of the IMF (so the default source of this info) (at least i think it was that page :-), dotn have a link now):

The 10% tax would apply only to HOUSEHOLD (not individuals, at least i understand it this way) and only those with NET worth ( wealth-debts= positive) so people with a lot of debts wont be affected (probably?). Also under the phrase "household" i understand that if 2 parents live in one house, still with their children (who already have their income) that all these 4 people would pay only one 10% tax from their net worth (so if you have a net wealth, try moving in with some of your family member that has a lot of debts into one household, and you should be free from taxation :-) ).

Surprised no one mentioned this thread yet:
https://bitcointalksearch.org/topic/my-bank-accounts-got-robbed-by-european-commission-over-700k-is-lost-160292
This was during the Cyprus bail-in.

Yes, but I would prefer if we call it what it is. Confiscation of private property, robbery, stealing from private bank accounts etc.

All EU countries are governed by the central EU leaders. In the case of my country over half our laws come from them, and the rest that we are allowed to make fall within that framework. I expect the numbers are similar for other countries but have no hard numbers on that. In essence, we are right now living in the United Nations of Europe. It's just not official yet and people like to be in denial about it.

What this means is that what can happen in one EU country can happen in any or all of them. Cyprus was a test case to see what the masses will tolerate. It will happen again, and again and again as long as we have countries going bankrupt.

lol... that will be an interesting situation. Net liability greater than net worth. In that case, I think the bankers will ask the individual to do forced labour. 

Totally agree and always agreed on :-)... On the other hand, there nothing as liquid as cash. BTC is still not and option for all savings (becauce GOV can ban it simply, rendering the price really low a really long time).

This is just one person example and it looks nice. But make that x1 000 000 people and you have recipe for a disaster. Who will buy they homes if so many people will be forced to sell it asap? And what will happen with people who have mortgages and they loan will be bigger than they home value? Banks will demand money to cover difference and if you wont pay, they will auction your house. This will make house prices fall dramatically. And probably not only this but cars and other assets too. I don't need to explain what will happen next.

Verses a bank collapse?  No.  We have to remember when they talk of bail-in they don't affect those below the threshold of the state guarantees, about €100k.  Their aim is bondholders €billions, converting secured loans to equity precisely to protect the depositors.

Well yeah i have read the articles (mostly on zerohedge), but i think they are quite over-reacting and blowing things out of proportion... Like when science say that they found a micribiological evidence of extraterestrial life and suddenly all news mediea are reporting on scientist founding out little green/grey men... Total overreacting and total blownout of proportion...
I came across these "conspiracy economy theories" (us dollar dead, supression of gold etc. etc.) in aprial 2013, so im quite new to the topic, but i remember that a lot of poeple said that the US (or global) economy will fail in spring 2013, then in summer, 2013, then in autumn, then in winter 2013... and still nothing... And it goes on and on (jsut put "economic collapse YEAR" in youtube search (e.g. economic collapse 2006 or other years) and youll find out that the economic collapse (which bailins are a part of) has been here since i dont know... 2005 or even earlier and still nothing has happened... the world should have ended at least 10 times now (due to economic problems) and still nothing happens. So even when i belive LONG term that th US will fail, there will be quite big economic problems in the world (worlwide stron depresion?) I also belive that the news media (even the alternative ones) are hugely exaggerating the issue... So when they say "Get ready to bailins in europe" i think we are still maybe even years away and it wont be as painfull as they painted out.
Thats why im writting here (probably not the best place due to the over-enthusiastic people around here) for different opinions...