2013 Conservative Budget.

[ndrwrld]

The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

am i correct in thinking certain bank liabilities = our money ?

Conservative 2013 Budget May Allow Banks to Confiscate Customer's Deposits

i thought this was crazy and quite impossible until i saw this, from the former Governor of the Bank of Canada.
Mark Carney: Canadian deposits safe under bail-in, but no guarantee | FP Street | News | Financial Post

 

[videotronic]

This action caused massive runs on Cyprus banks, riots, and unrest leaving citizens screaming "you took my life savings".

thats just screams good, factual, non-sensational reporting ^^

 

[Lojack]

Answer me this:

Would you prefer that the shareholders and bank customers* lost their money when a specific bank failed? Or all taxpayers?

It's a lousy situation to be in, but I would rather see the share holders, followed by the bank's depositors, pay in the event of the failure.

* = Depositers are protected by CDIC, so the government/taxpayer still ends up paying something. Problem is most such national depositor "insurance" schemes don't have enough money to protect against a major bank failing. But I digress.

 

[Hi i'm God]

(Subject to parliamentary approval)

/\ Which I find almost more offensive given their last omnibus bills, lack of debate and majority.

 

[octo]

i'd prefer it if they introduced regulations to minimize the chances of a bank depleting it's capital, instead of introducing legislation that seems to give the banks the green light to be more reckless.

 

[praktik]

i'd prefer it if they introduced regulations to minimize the chances of a bank depleting it's capital, instead of introducing legislation that seems to give the banks the green light to be more reckless.

Any regulation is doomed to fail because corporations are incentivized to elide them.

The system encourages banks to act the way they do and a new regulation is just a new challenge for their teams of laywers, who immediately find the most efficient way to thread the needle until their teams of lobbyists can water down the regulation. Eventually the most annoying regulations can be repealed if enough pressure is brought to bear.

Everyon cites Glass-Steagall but when that thing came out it was moments before finance looked for every way around it, instead of choosing to abide by the spirit of it. Over decades it was watered down until the day they got their allies in congress to actually repeal it.

This set the stage for our modern financial crisis so it is a little disheartening to hear about regulations being the answer to our problems when the issues are far more deep-seated and when the lesson of regulations like Glass-Steagall is that they don't work because they don't exist in a political context that allows them to work.

Of course we have to deal with the system we have and it's nice to see some kind of movement towards a different regulatory environment and some appetite for increased enforcement - but these would always be short-lived and ultimately unsuccessful if not married to a larger sea-change in the way we conceptualize our politics and the economy.

For a previous "moment" like that we can look to the time when they realized "Hey, isn't it kind of fucking stupid to put debtors in jail when that means they can't work and get creditors their money back, and the state has to incur expense to process and jail them?". Until that time it was seen as morally correct and perfectly normal to throw people into debtor's prison - then we devised a bankruptcy system that allowed people to pay back pennies on the dollar and get a second chance.

This opened up a whole new way of thinking that was revolutionary compared to the way we conceived of things before. It was also economically a better model that did better at driving growth. I think we need a similar revolution in corporate culture if we are really to avoid the next financial crisis - the systemic incentives are still there pushing us to the next one!

 

[Blysspluss]

M'eh. My deposits are not guaranteed by CDIC...and they are 100% guaranteed unlike the 100k limit on deposits in said "systemically important banks"

Gotta love the Credit Union.

Long as this process doesn't eat too many tax dollars...I'm neutral on this.

 

[kuba]

The optics of this are that the same may happen here as happened in Cyprus, but anyone who believes that to be true is out to lunch. It won't, ever. Relax.

 

[The Watcher]

The optics of this are that the same may happen here as happened in Cyprus, but anyone who believes that to be true is out to lunch. It won't, ever. Relax.

Well, just like the Harpies and the banks are getting prepared, so should you.
They've already voted on it, now it's just a matter of time till the market flops and austerity sammiches for all who have savings.

 

[tobywan]

I'm at the point where I don't believe anything any politician will ever do what they actually say when it's election time.

Doesn't matter if they're liberal, conservative, ndp, democrat, republican, muslim brotherhood or whatever title they choose to give themselves.

They all lie. And they all waste our money with no accountability or transparancy.

The system is broke, and I really can't wait till the day that the masses wake up and realize what's going on.

 

[The Watcher]

It's Not Just Reggie Warning Irishmen Anymore As Irish Presidency of the European Council Says Capital At Risk | Zero Hedge

Seems like Ireland is about to get Cyprus'd.

 

[Bass-Invader]

"certain bank liabilities" could mean anything. And would probably mean bonds, not deposits. Bonds are essentially loans to the bank, and people who buy them are consciously taking a risk that the bank will default - as is the risk with any loan.

When the financial crisis happened, the scramble to shovel state money into the banks resulted in most bondholders remaining untouched.

It was felt morally unacceptable that the public ended up holding the bag, while the people who lent money to the banks as an investment vehicle walked away without throwing into the pot.

It is overwhelmingly likely that the reference to bail in refers to bondholders. That is, in the event that a systemically important bank is about to fail, any taxpayer rescue is accompanied by some degree of haircut for the bondholders. Share the pain.

No sane government would implement a bail-in programme involving depositors because that would affect and frighten every voter in the country. The political risk, if not the civil unrest that would ensue would not be worth it. However, nobody is going to shed a tear if investors have to share the taxpayer's burden when a bank goes belly up.

 

[Lojack]

"certain bank liabilities" could mean anything. And would probably mean bonds, not deposits. Bonds are essentially loans to the bank, and people who buy them are consciously taking a risk that the bank will default - as is the risk with any loan.

Deposits are definitely referred to as liabilities by bankers as far as their balance sheet goes. I know several and they confirmed this to me years ago when I first discovered the term. Bonds may be as well, I'll need to check.

 

[Bass-Invader]

Deposits are definitely referred to as liabilities by bankers as far as their balance sheet goes. I know several and they confirmed this to me years ago when I first discovered the term. Bonds may be as well, I'll need to check.

wtf? did you like stop reading my post after the first sentence? I know they are. It refers to any instrument that makes a person a creditor of the bank. The point I was making is that the broad language of "certain bank liabilities" was not intended to refer to deposits.

 

[Lojack]

wtf? did you like stop reading my post after the first sentence? I know they are. It refers to any instrument that makes a person a creditor of the bank. The point I was making is that the broad language of "certain bank liabilities" was not intended to refer to deposits.

Why yes, yes I did