02
Mar
2016

Bail-In Regulation To Blame For “Bank Turmoil” In EU?

The Financial Times recently looked at how the new bail-in resolutions in the EU, U.S. and most of the western world and asked whether they may be leading to “bank turmoil” and increased concerns about banks and the banking sector in the EU. As is typically the case with coverage of the bail-in regime, the important article was little noticed.

Despite this lack of coverage, we believe bail-ins remain one of the greatest financial risks to investors, savers and indeed companies today. Yet they remain the most poorly covered financial risk and remain largely ignored by financial advisers, brokers and not surprisingly banks.


Bail-Ins – Key Considerations

bail-ins-considerations
Indeed, media internationally has ignored this growing and substantial financial risk and the risk that it poses to the deposits of savers, investors and companies and indeed to our respective economies. In a world already beset with huge deflationary pressures, bail-ins and confiscating deposits from savers including the capital of companies would be extremely deflationary and would likely contribute to serious recessions and potentially another global depression.

This is something we warned of when we first conducted our extensive research on the developing bail-in regimes in November 2013.

It is interesting and encouraging that the new government in Italy is aware of the risks of bail-ins and looks prepared to go against the new international deposit confiscation rules. Hopefully, it may at long last engender a real debate about the pros and significant cons of bail-ins and their risks and ramifications and contribute to people being prepared for bail-ins.

From the FT:

When Brussels last month trumpeted the launch of its new rule book on failing banks, it could hardly have imagined the political backlash would come so swiftly, or that the regime could be blamed for so much market turmoil.

At the time they were agreed in 2014, these so-called “bail-in” reforms secured unanimous backing from EU governments, which wanted to shift the burden of bank rescues away from taxpayers and on to investors and depositors. 

But the nascent regime is now under sustained attack from Italy for being ill-thought through, rushed and destabilising. Some analysts also cited it as one of several factors driving this week’s volatility in European bank stocks. A messy round of forced bondholder writedowns at Portugal’s Novo Banco last month heightened creditor jumpiness.

With European bank shares facing another tempestuous day on Thursday, these issues will be on the agenda of eurozone finance ministers at their regular Brussels gathering.

Full FT article ‘Bank Turmoil: Are Europe’s New Bail-In Rules To Blame?’
 

LBMA Gold Prices
02 Mar: USD 1,229.35, EUR 1,131.53 and GBP 881.54 per ounce
01 Mar: USD 1,240.00, EUR 1,141.70 and GBP 886.09 per ounce
29 Feb: USD 1,234.15, EUR 1,131.46 and GBP 890.95 per ounce
26 Feb: USD 1,231.00, EUR 1117.58 and GBP 878.87 per ounce
25 Feb: USD 1,235.40, EUR 1,121.41 and GBP 887.10 per ounce

Gold and Silver News and Commentary
Gold extends losses on robust U.S. data, higher stocks – Reuters
Gold holds steady in Asia as markets assess likely next Fed move – Investing.com
Gold ends lower as stocks rally after upbeat economic data – Marketwatch
Last Time Gold ETF Flows Were Higher QE Was Just Starting – Bloomberg
Gold, Silver Soar in February; US Mint Bullion Coin Sales Strong – Coin News

Best And Worst Performing Assets Of February And 2016 – Zero Hedge
How to Prepare Your Investments for a Market Crash – Telegraph
As Mervyn King warns that the project is doomed, is it time for the Eurozone to be broken up? – City AM
Classic Video: Margaret Thatcher On The Euro And “Federal Europe” In 1990 – Dollar Collapse
How Much More Loopy Can Financial System Get? – Money Week
Read more here

 

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Mark O'Byrne
Executive Director