Too Big Too Fail Banks - From Bail Out to Bail In -what does this mean for you?

mercredi 14 octobre 2015

I have moved this issue from the Corbyn thread as it needs a separate thread...

After the moral outrage that the public sector had to 'Bail Out' banks the G20 governments along with the Bank of International Settlements and the EU have changed policy on dealing with another failure.....

This is called 'Bail In' simply put it means the resources of the banks - account, bond holders and share holders will be used to refloat a new bank while the operations of the zombie institution continue....think Cyprus Banks

However, Derivative counter parties will have 'super creditor' status (this complicates the issue as Bank Derivative contracts are valued at $1.4 QUADRILLION....To view the link you have to Register or Login

At present then - individual account holders (you) are given a £75,000 insurance on any current/savings you have at a TBTF bank To view the link you have to Register or Login

What people do not grasp is that a bank account is the property of the Bank and it is NOT your money...it is treated as a the Bank's property and effectively an IOU to the account holder

So FSCS only applies to individuals deposits up to £75-85k per bank account, per institution, charities, and some small businesses.

Deposit Guarantee Scheme protection excluded the public sector, corporates, and SME's above a certain threshold.

However, looks like 2014 changes published by BoE meant expansion to include major corporate deposits To view the link you have to Register or Login

To conclude - when a TBTF bank fails next - the government will NOT bail it out

Individual and some corporate accounts will be insured to £75k - so if you hold anything else above that amount it will be seized...

Public sector, ie Local Authorities, Voluntary Sector, HE, FE, SME's will have their assets seized to refloat the Zombie bank....of course this would have dramatic effects - wages could not be paid for example - pensions as well

Some may argue that the dramatic effects of this would make the government step in....but now we know that our government's prefer to defend the banking sector and in particular the TBTF banks above all else.

Normally if a private company cannot meet its debts it folds - think of the steel plant in Redcar....so why are the laws of capitalism not applied to the TBTF banks? Why does the public sector prop up banks - but not manufacturers?

Finally here is the Deputy Governor of the BoE 'The Bank of England is the United Kingdom’s resolution authority for banks, building societies, central counterparties and certain investment firms. Resolution is the process by
which the authorities can intervene to manage the failure of a firm. The Bank seeks to ensure that firms — whether large or small — can fail without causing the type of disruption that the United Kingdom experienced in the recent financial crisis, and without exposing taxpayers to loss'.

And here is the explanatory paper To view the link you have to Register or Login

So now you know....


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