2013 Canadian Federal Budget contains a bail-in feature for collapsed Canadian Banks

Jeff Fitchett
Activist Post

The bail-out/bail-in that Cyprus has been subjected to has disturbed me quite a bit. Up until this point, collapsing countries have spared individual citizens' bank accounts (personal savings).  As you likely know, bank account holders with over 100k euros will lose between 30-40% of their cash in Cypriot bank accounts.

I have mentioned consistently for the last 4-5 years that the most vulnerable countries will be hit first and slowly the rot will make its way to "more stable" developed countries such as Canada.  I did a little digging and noticed on page 155 of the 2013 Canadian Federal budget that the Government of Canada has put in a section on this very topic.  

Specifically, "The Government proposes to implement a bail-in regime for systemical important banks. This regime will be designed to ensure that in the unlikely event that a systemical important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into the 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." Here's the link and click on page 155: http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf

A bail-in means that investors in a bank's stock, a bank's bonds or deposit holders pay for the collapsed institution. Just so you understand what I'm saying; the government mentioned: "the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into the regulatory capital". If you go to Scotiabank's 2012 annual report and pull up page 21: http://www.scotiabank.com/ca/common/pdf/ir_and_shareholders/Scotiabank_2012AnnualReport_ENG.pdf 

Under the liabilities section of Scotiabank's balance sheet you will notice that Personal deposits fall under the banks liabilities. Scotiabank has $135.4 billion in personal deposits.

Pay attention to the amount of cash you have sitting in your bank account.  Banks in Cyprus were closed for almost two weeks. Do you have enough cash at home to last you two weeks to cover things like gas, food, etc? If not, you might want to rethink your personal situation.  Pass this on to people you care about.