Potential Bank Bail In

[stormymonday_2011]

Why was the Cyprus bail in a disaster? You do not state why, despite your "erm" and blabbering on about nukes.

I think it was a success and an excellent template for others to follow.

Legislation for bail in is just going through parliament so should be available for use soon. The Coop was also sorted out through a form of bail in.

Some other points relating to other posts:

- To the OP, spread your money around or go for National Savings.

- The supermarket banks are no safer than any other bank. I think they are reliant upon other banks' infrastructure anyway. They are white label accounts.

- The Cyprus bail in did affect business accounts as well as personal accounts.

The killer aspect of the Cyprus banking bail in (as it would be for any similar exercise for a UK bank ) are the capital controls that have to accompany the exercise to prevent a mass run on deposits.

The latter will impact every saver not just those with large deposits.

Thus in Cyprus while only those with large savings took the immediate haircut the rest of the depositors found they could only get money out in very small amounts.

It was this latter restriction as much as much as the haircut on big deposits that caused the Cypriot economy to shrink so quickly.

Physical cash tended to be hoarded and the velocity at which money circulated crashed.

Bail ins are highly deflationary so people should be careful what they wish for since it may be your company and your job that disappear not just your bank account (ie you will get your HPC alright but you wont be able to buy the house even at the lower price).

Edited January 1, 2014 by stormymonday_2011

[stormymonday_2011]

Of course, closing the banks and making the errant execs redundant would have been a success too.

At the moment, instead of a 1 all draw, we have Bankers 1, savers 0

Quite.

I can understand that the banking system had to be bailed out in 2008-2009 but that did not necessarily mean preserving the banks as they are currently structured.

In fact rather than merging the banks it bigger and bigger entities (with matching increases in bonus) as a protection against default they should have broken them up into smaller units. By concentrating the risk of failure in fewer places they have more or less guaranteed that any future crisis will be much, much worse. Another disastrous decision by Gordon Brown and Co I am afraid to add to his many others (not that the Tories have shown much enthusiasm for unpicking it)

[billybong]

Quite.

I can understand that the banking system had to be bailed out in 2008-2009 but that did not necessarily mean preserving the banks as they are currently structured.

In fact rather than merging the banks it bigger and bigger entities (with matching increases in bonus) as a protection against default they should have broken them up into smaller units. By concentrating the risk of failure in fewer places they have more or less guaranteed that any future crisis will be much, much worse. Another disastrous decision by Gordon Brown and Co I am afraid to add to his many others (not that the Tories have shown much enthusiasm for unpicking it)

Likely it was what the banks said they wanted?

[Killer Bunny]

But to return to OP's predicament. Why not park some in trackers or decent divi-paying shares wrapped in an ISA?

Bcos share prices are huge

[Killer Bunny]

No doubt Cyprus was the template.

Bail Ins are coming.

I would put it at odds on within 5 years and evens within 3

[19 year mortgage 8itch]

Do you not think the amount of cash held should influence a buying decision?

Taking on loads of debt for an 'overpriced' asset is folly sure enough but the OP won't be looking for a 90% mortgage. As I said, it depends on how much rent is currently being paid. If the mortgage is low enough compared to rent to handle an increase in interest rates, you still think an 'overpriced' house purchase is wrong?

It doesn't matter how much money you have, I'm not sure that buying in fixes anything.

[bearwithasorehead]

Bcos share prices are huge

Uk stocks are still relatively good value on historic PE averages.

[Killer Bunny]

Uk stocks are still relatively good value on historic PE averages.

Lies, damn lies etc

Not long term. 30 years sure. Includes 2000 (100+ P/E)

[Biggus]

Printing money and using it to bail out banks has had the same effect on your savings as a bail-in. Forcing down interest rates has had the same effect. For some reason this method of theft seems to be more palatable to the victim, hence it is more likely to be the preferred method of theft.

[Ah-so]

The killer aspect of the Cyprus banking bail in (as it would be for any similar exercise for a UK bank ) are the capital controls that have to accompany the exercise to prevent a mass run on deposits.

The latter will impact every saver not just those with large deposits.

Thus in Cyprus while only those with large savings took the immediate haircut the rest of the depositors found they could only get money out in very small amounts.

It was this latter restriction as much as much as the haircut on big deposits that caused the Cypriot economy to shrink so quickly.

Physical cash tended to be hoarded and the velocity at which money circulated crashed.

Bail ins are highly deflationary so people should be careful what they wish for since it may be your company and your job that disappear not just your bank account (ie you will get your HPC alright but you wont be able to buy the house even at the lower price).

What makes Cyprus a little different is that it was basically the bankruptcy of the country as well as the banks. In the UK the Coop had a voluntary bail in, but even if it had been compulsory it would not have made a difference - life would have carried on.

The other thing about Cyprus was that its banks had relatively little wholesale debt, meaning that account holders had to be targeted. The major UK banks have quite a lot of bonds in issue. These would be bailed in first, leaving bank accounts unaffected, in all probability.

[dryrot]

What makes Cyprus a little different is that it was basically the bankruptcy of the country as well as the banks. In the UK the Coop had a voluntary bail in, but even if it had been compulsory it would not have made a difference - life would have carried on.

The other thing about Cyprus was that its banks had relatively little wholesale debt, meaning that account holders had to be targeted. The major UK banks have quite a lot of bonds in issue. These would be bailed in first, leaving bank accounts unaffected, in all probability.

There is a confusion here. The Cypriot bail in affected depositors, whereas the Coop was bondholders. Bondholders should be aware of the risks, and the roi is much greater. Don't get confused by the wailing of Cop losers, they held bonds.

[stormymonday_2011]

There is a confusion here. The Cypriot bail in affected depositors, whereas the Coop was bondholders. Bondholders should be aware of the risks, and the roi is much greater. Don't get confused by the wailing of Cop losers, they held bonds.

The Coop did not go through BOE resolution so it was not a compulsory 'bail in' as the majority of the institutions bondholders voluntarily accepted the bond to equity swap and the wider Coop group stumped up the rest of the cash needed to keep the bank going.

A full blown bankruptcy might not stop with the bondholders and could be lot more brutal

[Ah-so]

The Coop did not go through BOE resolution so it was not a compulsory 'bail in' as the majority of the institutions bondholders voluntarily accepted the bond to equity swap and the wider Coop group stumped up the rest of the cash needed to keep the bank going.

A full blown bankruptcy might not stop with the bondholders and could be lot more brutal

Co-op needed recapitalisation and it was done through the voluntary debt for equity swap. In future it could be done through the Banking Reform Bill which is going through parliament.

In future systemically important/TBTF banks will need to have plenty of external debt which can be bailed in without hitting depositors. However, if losses are significant, then bigger accounts will need to take a haircut.

Smaller banks are unlikely to issue bonds, so depositors are very likely to be hit in the case of a bankruptcy.

[Bloo Loo]

Co-op needed recapitalisation and it was done through the voluntary debt for equity swap. In future it could be done through the Banking Reform Bill which is going through parliament.

In future systemically important/TBTF banks will need to have plenty of external debt which can be bailed in without hitting depositors. However, if losses are significant, then bigger accounts will need to take a haircut.

Smaller banks are unlikely to issue bonds, so depositors are very likely to be hit in the case of a bankruptcy.

the issue is that the problem...unpayable debt...is NOT under control as the MSM would have us believe. 5 years of protection for busted banks has NOT produced the time needed to trade through the issues...If anything, banks have used the time to make the situation worse.

This is still just beginning.

[urban_hymn]

Easy.

Put your house deposit in the TSB. It's a brand new bank with no skeletons in the cupboard and no dodgy lending book so won't be in need of a bail in.

[Ah-so]

Easy.

Put your house deposit in the TSB. It's a brand new bank with no skeletons in the cupboard and no dodgy lending book so won't be in need of a bail in.

TSB is still just a part of Lloyds. It has not been formally separated yet.

[BananaMan]

Easy.

Put your house deposit in the TSB. It's a brand new bank with no skeletons in the cupboard and no dodgy lending book so won't be in need of a bail in.

My current account is witth Metro Bank, now they are very new but only ever make a loss!

[BananaMan]

Seems the IMF think bail ins are coming.

http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

[BananaMan]

If this occurs then I think finally we'll see blood in the streets. People have been pushed and pushed with low rates and now a proposed theft would surely cement the rage.

Yes i think if it was to happen whichever party was in power would cease to exist ... so preferably a liblabcon coalition!

[Wurzel Of Highbridge]

Seems the IMF think bail ins are coming.

http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html

Looks like it's time for me to convert a large chunk of my savings back into a kilo shiny metal object.

[StainlessSteelCat]

If this occurs then I think finally we'll see blood in the streets. People have been pushed and pushed with low rates and now a proposed theft would surely cement the rage.

I think you'll see nothing of the kind. The masses will be offered higher house prices in return for sacrificing the value of their savings - and most will take the deal.