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.

The Bail-Ins Are Back! Portugal Slaps Senior Bank Bondholders With €2 Billion Loss

Another bail-in. this time senior Portuguese bank bond holders are on the hook to bail out another failed bank.

December 30, 2015

A Crisis Worse than ISIS? Bail-Ins Begin

Bail-ins happening to Italian banks. Ellen Brown summaries how legislation puts depositors on the very bottom of the totem pole when a private bank fails.

December 29, 2015

Bail-In Mechanism to be Implemented Across All EU

EU banks are given two months to put in place bail-in mechanisms

June 20, 2015

Austria to Enact Bail-in Rules

Austria will enact bail-in rules in July. Bank deposits will no longer be guaranteed.

May 1, 2015

Bail-in At Your Local Bank – Part 4: Your Last Chance To Act

G20 governments are quietly slipping bail-in provisions into law to make sure that next time a too big to fail bank blows up again by derivatives it will be rescued using depositors’ money, in the name of protecting the taxpayers.

January 6, 2015

Bail-in At Your Local Bank – Part 3: Institutionalizing the Money Grab

Herded along by the Financial Stability Board, governments of leading economies endorsed a framework during the past G20 Summit whereby depositors’ money will be used to rescue a failing bank when the global derivatives casino blows up again next time.

January 5, 2015

Bail-in At Your Local Bank – Part 2: The Derivatives Time Bomb

The derivatives market, the trigger of the 2008 global financial crisis, has since gotten even bigger and more concentrated into fewer hands. A mutually assured destruction awaits the global economy next time it goes off again.

January 4, 2015

A Primer on Derivatives

Financial derivatives are financial contracts in which the promised payoffs are derived from the performance of another underlying entity. The underlying entity can be an equity (such as an individual stock or a stock index), interest rate, credit or c …

January 3, 2015

Bail-in At Your Local Bank – Part 1: The Stage Is Set

With no fanfare and little to no media coverage, your government has just put in place a mechanism to use your deposit money to bail-in a failing bank, like what happened in Cyprus a short time ago.

January 3, 2015