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WASHINGTON – The questionable practice of
“bail-ins” begun by Cyprus a year ago to keep banks solvent is
beginning to spread to other nations, and holders of large deposits
are starting to see their balances plunge literally overnight.
A “bail-in,” as opposed to a bailout that
countries especially in Europe have been seeking from the
International Monetary Fund and the European Union, is a recognition
that such outside monetary injections won’t be forthcoming.
Consequently, banks have been seeking money
from another source – their large depositors. The funds are simply
taken and applied to a bank’s recapitalization in lieu of
government bailouts.
The practice essentially is a transfer from a
personal savings account to the bank’s operating account, without
the customers’ permission or even any notice.
The example set in Cyprus when the island
nation confronted its financial crisis now is spreading to such other
countries as Italy, Poland, New Zealand and now Canada.
Financial experts agree that the practice soon
could spread to the United States.
The “bail-in” a year ago in Cyprus
developed after the island nation was refused further outside
financing from the IMF and the European Central Bank of the EU, of
which the Mediterranean island is a member.
Cyprus never was looked upon as a place to
spend money. Instead, it was seen more as a place to safely hide
large deposits of cash for private individuals and companies not only
in Europe and Russia but for major shareholders and top executives
from all over the world.
Hiding huge sums of cash was made easy in
Cyprus with such mechanisms as outright bank deposits, shell
companies and holding companies, with massive transfers taking place
between them.
“Cyprus was a leader – in some circles and
for some applications, the leader – in quiet storage, management
and structuring of exceptionally large sums for private individuals
and corporations all over the world,” financial expert Franklin
Raff wrote in a March 2013 WND article.
“Cypriots were fast learners in the fields of
global asset protection and ‘tax optimization,’” Raff said.
“Cyprus’ 2004 entrance into the E.U. gave financial operations a
deeper veneer of legitimacy and security.
“All of this meant almost a decade of rapidly
expanding business,” he said. “This was surely from Europeans and
Russians wary of unpredictable tax laws and indiscriminate,
extralegal confiscations, but also from entities in North America and
elsewhere.”
Because a long line of EU banks had been bailed
out at major public expense during the 2008-2009 financial crisis,
the EU decided to turn down two of Cyprus’ major banks, Laiki and
the Bank of Cyprus, for similar help.
In an effort to save the Cypriot economy from
collapse, the government passed a law that took some 4.3 billion
euros in deposits belonging to some 14,000 depositors just in the
Laiki bank alone, leaving each depositor with no more than 100,000
euros, the limit on deposit insurance under EU regulations.
Ultimately, Laiki bank folded, with depositors’
diminished assets transferred to the Bank of Cyprus.
In an effort to recapitalize the Bank of
Cyprus, Cypriot officials imposed a 47.5 percent loss on deposits
exceeding the 100,000 euro limit, exchanging the seized deposits for
shares in the bank.
Depositors in Cyprus lost an estimated total of
10.6 billion euros.
In viewing the recapitalization experience in
Cyprus, financial experts say “bail-ins” are increasingly
becoming accepted practice around the world due to the lack of any
outside bailouts.
In jeopardy will be all private bank accounts
and private pension funds.
Financial sources say that the government of
Poland just “raided” private pension funds in an effort to reduce
the size of the government debt.
According to a Reuters report, the Polish
government will transfer to the state many of the assets held by
private pension funds, slashing public debt but putting in doubt the
future of the multi-billion-euro funds, much of which is
foreign-owned.
“The Polish government is doing the best that
it can to make this sound like some sort of complicated legal
maneuver, but the truth is that what they have done is stolen private
assets without giving any compensation in return,” said financial
expert Michael Snyder writing for the Financial Collapse blog.
Now, finance ministers in the EU are
undertaking a similar approach.
They have approved a plan to force bondholders
and shareholders to finance future bank failures before going to
taxpayers for bailouts.
This will apply to bondholders and shareholders
with deposits over 100,000 euros. Those with less than 100,000 euros
of insured deposits will be protected.
“What this means is that if you have over
100,000 euros in a bank account in Europe, you could lose every
single bit of the unprotected amount if your bank collapses,”
Snyder said.
Italy also is organizing a form of its own
“bail-in” for the country’s oldest bank as it has halted any
further interest payments and doesn’t intend to make up for the
missed payments if and when they resume.
While deposits will remain untouched for now,
financial experts believe it will only be a matter of time before its
depositors experience a Cypriot-type “bail-in.”
In Canada, the government has actually written
a “bail-in” provision into its new government budget proposal in
its “Economic Action Plan 2013.”
“This new budget actually proposes to
implement a ‘bail-in’ regime for systemically important banks’
in Canada,” Snyder said.
Snyder believes that governments throughout the
world will be eyeing depositors’ money as part of the solution to
halt future failures of major banks.
“As a result, there is no longer any truly
‘safe’ place to put your money,” Snyder said.
“One of the best ways to protect yourself is
to spread your money around,” he said. “In other words, don’t
put all of your eggs in one basket. If you have your money in a bunch
of different places, it is going to be much harder for the government
to grab it all.
“But if you don’t listen to the warnings
and you continue to keep all of your wealth in one giant pile
somewhere, don’t be surprised when you get wiped out in a single
moment someday,” he added.
That certainly was the experience of the Andrew
Georgiou family in Cyprus earlier this year. Literally overnight, his
life’s savings of 750,000 euros, except for 100,000 euros which
were covered by deposit insurance, were wiped out. Georgiou
subsequently had a heart attack, though he survived.
He, like hundreds of other depositors in
Cyprus, has gone to court against the central bank and the Cypriot
government, but the outcome is far from certain.
Until You Read This Free Report And Learn The Secrets Of The Pros
A “bail-in,” as opposed to a bailout that countries especially in
Europe have been seeking from the International Monetary Fund and the
European Union, is a recognition that such outside monetary injections
won’t be forthcoming.Read more at http://www.wnd.com/2013/09/governments-coming-to-steal-savings-accounts/#ZPeBHMwsLeZ6Zwhz.99
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