“Italian banks are estimated to hold around £270billion of bad loans – more than 30 per cent of the eurozone’s total – which experts worry could spark another financial crisis for the country.
Backed by the government, financial institutions have now agreed to a £4billion package aimed at helping the Italy’s most troubled banks.
The cash is to be used to buy the high risk loans, as well as injecting money into firms where there are worying shortfalls…”
–Daily Express (UK) website, April 13, 2016
Here’s an interesting take on Italy’s bank bail-in scheme from Matthew Lynn in his “London Eye” column on MarketWatch.com. Lynn said this about the proposed Atlas fund:
But the fund is significant for the economy beyond Italy. Why? Because it is essentially a bail-in, rather than a bailout, vehicle. Since the crash of 2008, we have grown used to the idea that governments rescue the banking industry. But in Italy, other banks and financial institutions are being strong-armed into stepping up to the plate. In effect, Italian rescues will be paid for by shareholders and depositors. If that can be imposed in Italy, then why not in the rest of the world? In reality, next time there is a financial collapse in the U.K., the U.S., Germany or any other major economy, it may not be the government that rescues the industry — it will be you and me…
The Atlas fund will be paid for by other banks, by insurers and by pension funds. In effect, the money will come from shareholders and savers — anyone who has a bank account or a pension fund, which covers just about the entire population. Instead of the government or the central bank taking the burden onto its own balance sheet, it will be borne by ordinary people and any outsiders who own Italian equities…
The Italian example is the first time a bail-in has been applied across the board in one of the world’s major economies. A precedent has been set that others will be tempted to follow…
(Editor’s note: Bold added for emphasis)
Just this Tuesday I discussed the Heta Asset Resolution bank bail-in in Austria and shared with readers a warning from GoldCore’s Mark O’Byrne. He blogged on his company’s website Monday:
Heta’s bail-ins pertain to bond holders but it is important to note that recently introduced EU and international bail-in regulation mean that depositors in banks are now exposed to having their deposits bailed in…
Media internationally has not analysed this growing financial risk and the risk that it poses to the deposits of savers, investors and companies and indeed to our respective economies. In a world already beset with huge deflationary pressures, bail-ins and confiscating deposits would be extremely deflationary and would likely contribute to severe recessions…
(Bold added for emphasis)
And I asked again in Tuesday’s post:
What about the contents of bank safe deposit boxes associated with depositor accounts? Could the private wealth stored in these secured containers eventually be in danger of confiscation too?
By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)
(Editor’s note: A qualified professional should be consulted prior to making a financial decision based on information found in this weblog. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. Christopher E. Hill, the creator/Editor of this blog, is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented on the site.)
Lynn, Matthew. “Opinion: A message from Italy: You’re paying for the next bank bailout.” MarketWatch. 12 Apr. 2016. (http://www.marketwatch.com/story/a-message-from-italy-youre-paying-for-the-next-bank-bailout-2016-04-12). 13 Apr. 2016.