Tag Archives: bail-in

Canadian Bank ‘Bail-In’ Legislation Latest

Back on March 23 I blogged about Canada introducing bank “bail-in” legislation. I wrote:

As concerns grow about the health of the global economy, ‘bail-in’ programs look to proliferate outside Europe. Leah Schnurr reported Tuesday afternoon on the Reuters website:

Canada will introduce legislation to implement a “bail-in” regime for systemically important banks that would shift some of the responsibility for propping up failing institutions to creditors.

The proposed plan outlined in the federal budget released on Tuesday would allow authorities to convert eligible long-term debt of a failing lender into common shares in order to recapitalize the bank, allowing it to remain operating.

The plan is in line with international efforts to address the potential risks to the financial system from institutions that are deemed too big to fail, the budget document said…

(Editor’s note: Bold added for emphasis)

I’ve been curious about the “progress” being made by our neighbors to the north with implementing this “bail-in” program for “systemically important banks.” Poking around the Internet the other day, I came across this article on Lexology.com from Craig Bellefontaine and Koker Christensen of international business law firm Fasken Martineau DuMoulin. They wrote on May 4, 2016:

Budget 2016, released on March 22, 2016, reiterated the Government of Canada’s commitment to introducing a bail-in regime. With the tabling of Bill C-15, Budget Implementation Act, 2016, No. 1, on April 20, 2016, the arrival of a bail-in regime to Canada came one step closer to fruition. Bill C-15 includes amendments to the Canada Deposit Insurance Corporation Act (“CDIC Act”), the Bank Act and other related Acts that, if passed, will establish the framework for a bail-in regime for Canada’s domestic systemically important banks (“D-SIBs”)

(Editor’s note: Bold added for emphasis)

In my March post I also asked this question:

Could depositors be targeted in a future Canadian bank bail-in as a result of this coming legislation? Is there a scenario where assets stored in bank safe deposit boxes might also be threatened? It’s too early to tell at this point…

Well, I spotted another piece on Lexology from Jennifer Allman, Darcy Ammerman, Pat Forgione, and Robert M. Scavone of Canadian business law firm McMillan. They wrote on May 12:

In our April 2016 bulletin, we discussed concerns over whether consumer deposits would be part of the eligible debt responsible for bailing-in a bank. For the moment, these concerns remain unanswered; the types of liabilities subject to the bail-in regime are not set out in Bill C-15. Instead, they will be specified in regulations to the Canada Deposit Insurance Corporation Act, which have yet to be prescribed. When the bail-in proposals were first proposed by the previous Conservative Government, communications from the Minister of Finance denied that depositors’ accounts would be subject to the bail-in regime

(Editor’s note: Bold added for emphasis)

Stay tuned…

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.)

Sources:

Bellefontaine, Craig and Christensen, Koker. “Canadian Bail-In Framework Unveiled.” Lexology.com. 4 May 2016. (http://www.lexology.com/library/detail.aspx?g=76d770fc-8b49-44d7-9eb2-741549ac0cc7). 7 June 2016.

Allman, Jennifer, Ammerman, Darcy, Forgione, Pat, and Scavone, Robert M. “Updates to the Bail-In Regime: Introduction of Bill C-15.” Lexology.com. 12 May 2016. (http://www.lexology.com/library/detail.aspx?g=2f5edde7-7cf8-42f6-a93b-324f10ae16aa). 7 June 2016.

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Canada Introducing Bank ‘Bail-In’ Legislation

As concerns grow about the health of the global economy, ‘bail-in’ programs look to proliferate outside Europe. Leah Schnurr reported Tuesday afternoon on the Reuters website:

Canada will introduce legislation to implement a “bail-in” regime for systemically important banks that would shift some of the responsibility for propping up failing institutions to creditors.

The proposed plan outlined in the federal budget released on Tuesday would allow authorities to convert eligible long-term debt of a failing lender into common shares in order to recapitalize the bank, allowing it to remain operating.

The plan is in line with international efforts to address the potential risks to the financial system from institutions that are deemed too big to fail, the budget document said…

(Editor’s note: Bold added for emphasis)

Funny how I just talked last night about “bail-ins” as part of a growing global trend of government/banking system wealth confiscation. Again, from the section entitled “Why Offshore Private Vaults” on this blog’s sister site

• Germany, July 2014, plans approved for creditor (may also mean depositor) bail-in of banks beginning in 2015, a year earlier than required under European-wide plans setting rules for failing financial institutions
• In November 2014, the G-20 Group of Nations endorsed a proposal which offshore experts The Nestmann Group says “profoundly changes the rules for banking globally, and not in a good way. Deposits in banks that are ‘too big to fail’ will be ‘promptly recapitalized’ with their ‘unsecured debt.’ This avoids those nasty taxpayer-funded bailouts that proved so politically unpopular during the 2008-2009 financial crisis. And the largest chunk of unsecured debt is your bank deposits. Insolvent banks will recapitalize themselves by converting your deposits- checking accounts, but also money market accounts and CDs- into stock. Thus, when you deposit money in a bank, you’re taking the same risk as someone buying a stock.”
• European Union, January 2016, new EU bank bail-in procedures implemented on New Year’s Day via the Bank Resolution and Recovery Directive. Central to the BRRD is the single resolution mechanism. The European Council (EU institution that defines the general political direction and priorities of the European Union ) said in a November 30, 2015, press release, “The single resolution mechanism (SRM) is aimed at ensuring the orderly resolution of failing banks without recourse to taxpayers’ money. This will involve both a systematic recourse to the bail-in of shareholders and creditors, in line with the EU’s directive on bank recovery and resolution, and the possible recourse to the SRF…” Note that bit about “creditors.” From my research on the subject, it has been argued that the terms “creditors” and “depositors” are interchangeable. As such, depositors may be on the hook for a future EU bank bail-in as a result of this new setup.

(Editor’s note: Bold added for emphasis)

Could depositors be targeted in a future Canadian bank bail-in as a result of this coming legislation? Is there a scenario where assets stored in bank safe deposit boxes might also be threatened? It’s too early to tell at this point.

Stay tuned…

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.)

Source:

Schnurr, Leah. “Canada to introduce ‘bail-in’ bank recapitalization legislation.” Reuters. 22 Mar. 2016. (http://www.reuters.com/article/us-canada-budget-banks-idUSKCN0WO2Y5). 23 Mar. 2016.

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Related Reading: OECD’s William White Warns Of Future European Bank ‘Bail-Ins’

Yesterday on my Survival And Prosperity blog I talked about an article on The Telegraph (UK) website last week where William White, the chairman of the Economic and Development Review Committee (EDRC) at the Organisation for Economic Co-operation and Development (OECD), issued a grave warning about the health of the global financial system. The former chief economist of the Bank for International Settlements (BIS) stated:

The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up…

Readers may have already heard/read about White sounding the alarm. But keep in mind the following from Ambrose Evans-Pritchard’s piece concerning potential new wealth confiscation activity in Europe. Evans-Pritchard wrote:

The next task awaiting the global authorities is how to manage debt write-offs – and therefore a massive reordering of winners and losers in society – without setting off a political storm.

Mr White said Europe’s creditors are likely to face some of the biggest haircuts. European banks have already admitted to $1 trillion of non-performing loans: they are heavily exposed to emerging markets and are almost certainly rolling over further bad debts that have never been disclosed.

The European banking system may have to be recapitalized on a scale yet unimagined, and new “bail-in” rules mean that any deposit holder above the guarantee of €100,000 will have to help pay for it…

(Editor’s note: Bold added for emphasis)

Not only is White an “insider,” but as The Telegraph’s international business editor noted:

The warnings have special resonance since Mr White was one of the very few voices in the central banking fraternity who stated loudly and clearly between 2005 and 2008 that Western finance was riding for a fall, and that the global economy was susceptible to a violent crisis…

Whenever the topic of potential bank bail-ins is brought up, my mind immediately turns to the safe deposit boxes held by customers of the financial institutions. In a major banking system crisis, I question whether certain lawfully-obtained/owned contents of those secured containers located within the banks won’t be seized- with the “blessing” of some government-gone-rogue- for the stated purpose of making the system “sound” again.

You can read the entire article over on The Telegraph website here.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

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