Investors should be reassured that financial institutions generally do their utmost to protect their customers’ assets and manage them to secure optimal benefits. After all, it is hardly in their own commercial interests to do otherwise. However, they are also obliged to adhere to the laws governing their jurisdiction, and this particular obligation has sometimes proved costly for their customers.

In 2008, around the time of the global economic downturn, Argentina nationalized its private pension funds, with critics accusing the government of confiscating these private assets to repay the country’s public debt. Such sequestration of private funds is by no means limited to Latin America alone. Early in 2009, Ireland used its national pension fund assets to help pay for an EU/IMF bailout. Elsewhere, the governments of France, Hungary and Bulgaria all raided pension funds between 2010 and 2011 as a means of relieving debt pressures on the public purse.

More recent developments suggest that more and more governments are granting themselves fiscal powers to seize legitimate private assets. Spain, for example, imposed a tax of 0.03% on all bank account deposits (2014), while Greece gave its tax officials the power to open certain bank safe deposit boxes, in order to confiscate quantities of cash and valuables from some Greek owners (2015).

Significant moves have also taken place at international level: At a meeting in November, 2014, the G20 Nations endorsed a plan to ‘promptly recapitalize’ the deposits of banks deemed ‘too big to fail’ by using their ‘unsecured debt.’ Commenting on this landmark proposal, offshore experts The Nestmann Group said at the time this development “profoundly changes the rules for banking globally, and not in a good way.” According to Nestmann, with the primary source of unsecured debt being customer deposits, insolvent banks will thus be free to recapitalize by converting not just deposit and current accounts, but also CDs and money market accounts, into stock.

The EU’s own proposals for failing banks, the Bank Resolution and Recovery Directive (BRRD), became law in 2016, and a year earlier in Germany. According to the European Council, these measures will facilitate “a systematic recourse to the bail-in of shareholders and creditors”. Experts believe the slightly ambiguous reference to bank “creditors” can be taken to mean any future EU bank bail-in will likely also involve the assets of bank depositors.