Topic: Canada Depositor Haircut Bail-In Provision For Banks in 2013 Budget (Read 4095 times)
Pretty alarmist for rather vague language - will have to see what comes of it. If a bank is running out of capital, there are
1. Government cash for assets, stock or debt.
2. Private cash for assets, stock or debt.
3. Depositor's money.
The statements say that they want to create a system to fix under-capitalized banks - but not do #1. The lack of private money to buy bank debt (#2) is often the main cause of the capitalization issue.
There are many ways for the government to fix this problem - here are some examples.
a. Make the banks have more capital (more regulation).
b. Allow banks to easily sell large assets (e.g. subsidiaries) to private investors to raise cash.
c. Allow banks to seize depositor's money.
Only option a is called out. Options (b), (c) and possibly others are not called out explicitly - the "worst" statement is:
"This regime will be designed to ensure that,
in the unlikely event that a systemically important bank depletes its
capital, the bank can be recapitalized and returned to viability through the
very rapid conversion of certain bank liabilities into regulatory capital."
Banks have many liabilities, including depositor's money.
March 30, 2013, 06:40:55 AM
At least they are planning ahead.
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