Topic: Bank bail-in

In a Nutshell

In the wake of the global financial crisis in 2008 during which Western governments and banking authorities printed trillions of dollars bailing out private (too-big-to-fail) banks, new legislation has been introduced in most OECD countries to ensure that depositors’ money instead of taxpayers’ money will be used next time a bank fails.


The problem is not so much that instead of taxpayers (read you) bailing out a failing bank, depositors (read you) have to bail it out. The problem is twofold: (1) a depositor is typically the very last in the line of creditors when a bank fails, and (2) many banks are loaded with toxic derivatives and your deposits are intermingled with them.

No. Derivatives were the primary cause for the global banking crisis in 2008. Not only have these derivatives not gone away, the total notional value held by these too-big-to-fail banks are now greater than in 2008. See Part 2: The Derivatives Time Bomb

Your money becomes the bank’s asset and you become an unsecured creditor of the bank.

No, the amount of deposit insurance would be like five drops in a bucket when one of these banks loaded with derivatives blows up. See Part 3: Institutionalizing the Money Grab

Dead last. To add insult to injury, counter-parties to the bank’s derivatives are first in line among the secured creditors to salvage from the carcass when the bank fails.

It has already happened in Cyprus and something is being ‘arranged’ in failed banks in Austria and Portugal. The only reason it did not happen during the last financial crisis is because your government printed trillions of dollars to bail out the banks. Such is unlikely to happen again next time.

(1) Learn the type of derivatives exposure your bank has and take your money out of those banks that are heavily exposed, and (2) keep your balance below the FDIC/CDIC limit in order to soften the blow.

Shock Waves Spread from Spain’s New Banking Crisis

The shares of Spain’s sixth biggest bank, Banco Popular, plunged 36% this week to €0.43, causing senior officials of the ECB to warn that the bank could be wound down if it fails to find a buyer. Should that happen, it would be the first major test of …

June 3, 2017

Canadian Banks Derivatives Expanded By A Trillion in 2016

Another glance at the total derivatives the big 5 Canadian banks are exposed to since our last report shows the banks collectively continued to expand their derivatives books – by almost 1 trillion.

March 28, 2017

Deutsche Bank Prices €8 Billion Stock Offering At 35% Discount

In its fourth capital infusion since 2010, Deutsche Bank plans to raise €8 billion through the sale of equity. Existing shareholders can expect a massive dilution of 35%.

March 20, 2017

Monte dei Paschi: Bail-out Or Bail-in?

In the latest episode of the slowly unfolding European banking crisis, Italy is set to bailout with public money Monte dei Paschi, the country’s third largest bank, after the latest attempt to lure private investors to save the bank has failed. A €20 b …

December 21, 2016

Italy Granted “Extraordinary ” €150BN Bank Bailout Program To Prevent “Panic, Run On Deposits”

Under the cover of market turbulance as a result of Brexit, Italy/EU injected €40 into its banking secor and also tossed in a €150 billion (US $166 billion) of guarantees in their latest effort in preventing a bank run on Italian banks.

July 3, 2016

European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks

Two days of breathtaking losses for the European banking shares after Brexit clearly shows the fragility of the banking sector there. Brexit is just one of the many possible triggers causing another banking crisis to flare-up.

June 27, 2016

Canadian Bank Derivatives Exposures – 2016 Q1 update

In light of the recent bank bail-in legislation introduced by the Canadian government, here’s an update on how much the big 5 Canadian banks are exposed to derivatives, those toxic financial instruments of mass destruction which blew up the financial world in 2008 had it been not for the governments using massive public money to bail out the private banks.

June 11, 2016

Austria Just Announced A 54% Haircut Of Senior Creditors In First “Bail In” Under New European Rules

First bank bail-in in action under the new Bank Recovery and Resolution Act took effect in Europe in 2016. Austria just announced its decision to bail-in senior creditors of failed Heta Bank. Highlights: 100% bail-in of all subordinate liabilities, 54% …

April 10, 2016

Canada Introduces Bank Bail-in Regime to Bail Out Failing Banks

Following the EU’s footsteps, the government of Canada introduces bail-in legislation to bail in depositors’ money in order to bail out future failing banks.

April 3, 2016

A Crisis Worse than ISIS? Bail-Ins Begin

Bail-in mechanisms in G20 countries enter implementation phase in 2016.

January 11, 2016