When the Cypriot government forced account holders to cover bank losses earlier this year most of the world assumed this was a one-off event, limited only to the people of Cyprus.
Though warnings urging depositors to get their money out of banks spread across the world, few have taken them seriously.
Perhaps now they’ll reconsider.
We’re all familiar with bail-outs, as in the government rescuing failed institutions, namely banks, by injecting them with tens of billions of dollars to prevent collapse.
But have you ever heard of a bail-in?
Japan’s Financial Services Agency will enact new rules that will forced failed bank losses on investors, if needed, via a mechanism known as a “bail-in,” according to The Nikkei. Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases, the report noted.
Cyprus was a test run. It worked.
This is now the official policy of the country of Japan, and is a serious consideration throughout the Eurozone and the United States.
Euro zone finance ministers will discuss on Thursday how to decide which creditors will lose money and in what order during future bank rescues by the bloc’s bailout fund, the European Stability Mechanism.
Just so we’re clear, we are all bank creditors by these definitions, thus the regulations being created apply not to just large bond holders, but every individual depositor.
Notice how they didn’t say “in case future bank rescues are necessary.” That’s because they know what’s coming.
The collapse of the global financial system is a foregone conclusion and it has just been confirmed by finance ministers around the world.
When the next banking crisis hits the United States you can be assured that creditors (i.e. individual depositors) will be forced to ‘bail them in.’
Given that that billionaire insiders are rapidly unloading millions of shares of financial stocks as we speak, there is a strong possibility that this scenario may soon unfold.
So, if you’ve got any significant amount of money at financial institutions, you’d better think twice about how safe it is.
Of course, this is the United States of America, where nothing of the sort could ever happen. According to Federal Reserve Chairman Ben Bernanke, here in the U.S. the crisis is contained and poses no risks to the broader economy or financial markets.
So, you can probably just move along and ignore this warning.
Nothing to see here… It’s just Japan and Europe, after all, and they are all the way on the other side of the ocean.