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Who has 85k in the bank? Guarantee system abolition proposed in EU plans.


ebull
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20 hours ago, ebull said:

Story as I understand it:

The EU are making plans to adjust the 2016 bank bail-in system.

They have asked the ECB for advice who have suggested replacing the 85k guarantee on bank deposits with " access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request " [zerohedge link below]

I am guessing it now goes back to the EU who make a next version of the plan and vote on a new system / rules changes.

Anyone have answers?

Will it be discussed / voted on by EU leaders? I don't know.

When  will MSM tell us about it? I don't know.

Will it apply to UK? Fairly sure yes.

Why hasn't Carney been asked for comment as well? Brexit?

Will we be doing this too post Brexit? THEY don't know.

 

This is about EU action [ie will apply to non-eurozone] rather than ECB specific so think it deserves a seperate thread. Was stolen from

http://www.housepricecrash.co.uk/forum/index.php?/topic/190224-the-big-fat-ecb-cockup-thread/&page=32

 

 

This is effectively capital controls. If a bank goes under you have no right to your capital. Just a dribble of 200 per week out of the cash till to stop the street violence.

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The limit has been tested before and proven to be worthless it’s just a confidence trick. 

they have bailed in below the 85k limit before. They sure as hell will do it again. You would be moronic not to think they would. 

you can’t protect your money fully, just don’t be ‘full retard’. You should actually have a balanced portfolio with good % in gold, bonds, shares, cash (and a little pinch of bitcoin) that way if they rob your bank savings, the value of your other assets adjust to leave you where you started prior to the bail-in of your bank savings. 

a massive percentage of people are in debt, and have very little in their accounts. bail-ins would be seen as making the ‘rich’ pay for bailing out the banks. as horrible as that it given that debt heads get bailed out again. Moral hazard. But sadly politically acceptable, obviously the real rich would be diversified and not actually hit. the sheep who dare to step out of line (us on HPC) get battered. 

life is stressful enough, having a balanced portfolio makes me sleep easy, there is a short term cost to doing so (less exposure to booming shares) but it’s well worth my mental health and a sense of security. and long term should prove the better strategy. 

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18 hours ago, Assume The Opposite said:

I don't think most people know that a deposit is a loan to the bank, and you have no legal right to that money once it's deposited. Your account is an 'account' of what they owe you. 

Who said that? The Bank of England!

"Depositors who deposit their money with a bank are therefore no longer the legal owners of this money, with the bank holding it in trust for them, but rather they are one of the general creditors of the bank"

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

So it's an unsecured, effectively interest-free loan to the bank? I'm used to depressing thoughts about my hard-won savings but this takes the biscuit.

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18 hours ago, Assume The Opposite said:

I don't think most people know that a deposit is a loan to the bank, and you have no legal right to that money once it's deposited. Your account is an 'account' of what they owe you. 

Who said that? The Bank of England!

"Depositors who deposit their money with a bank are therefore no longer the legal owners of this money, with the bank holding it in trust for them, but rather they are one of the general creditors of the bank"

http://www.bankofengland.co.uk/research/Documents/workingpapers/2015/wp529.pdf

This exactly.

Also, don't forget that the notion of "deposit insurance" (which is a myth, there is no pot of money to pay out savers of failed banks) is also a backstop on stupidity. Remember IceSave? They paid out the highest interest rates in the market and if you ask me, anyone who put their money into such a bank deserved to receive pence on the Pound when they went bank. Instead we abandoned moral hazard and paid out savers in full, thus encouraging the incredibly risky lending that we see today.

If you ask me, the EU have this one right.

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44 minutes ago, jiltedjen said:

The limit has been tested before and proven to be worthless it’s just a confidence trick. 

they have bailed in below the 85k limit before. They sure as hell will do it again. You would be moronic not to think they would. 

you can’t protect your money fully, just don’t be ‘full retard’. You should actually have a balanced portfolio with good % in gold, bonds, shares, cash (and a little pinch of bitcoin) that way if they rob your bank savings, the value of your other assets adjust to leave you where you started prior to the bail-in of your bank savings. 

a massive percentage of people are in debt, and have very little in their accounts. bail-ins would be seen as making the ‘rich’ pay for bailing out the banks. as horrible as that it given that debt heads get bailed out again. Moral hazard. But sadly politically acceptable, obviously the real rich would be diversified and not actually hit. the sheep who dare to step out of line (us on HPC) get battered. 

life is stressful enough, having a balanced portfolio makes me sleep easy, there is a short term cost to doing so (less exposure to booming shares) but it’s well worth my mental health and a sense of security. and long term should prove the better strategy. 

Can you remind when and where this was?

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Cyprus 

they just turned a load of peoples savings to bank shares. even under the 100 euro limit. 


would you really trust the government or bankers not to bail in savings to save their own wages and asset prices, The people who benefit from such a bail in (and don't loose) are the people making the decisions about doing it.

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Cyprus was before the 2016 bail-in system was created AFAIR, certainly before it came into effect. It was also politically more acceptable because many of those hit were Russians. Although I suspect the biggest players including Russians were helped to exit before the meltdown. Not healthy to piss off super-rich-Russians. No problem to nick savings off the lower echelons.

There were also bail-ins of Spanish struggling bank[s?] this or last year but they applied the rules and retail savers did not get hit, those further up the risk ladder did [shareholders and some bondholders?]. Maybe that's why they want to "review the system" now?

The reason I describe this as a bail-in-limit rather than a guarantee is that in a likely partial meltdown, the first step will be kick the can using the bail in rules. The second step although it could be immediate for a particularly bad bank that is smaller / not TBTF is payment of compensation.

Ability to pay the guarantee or print it [everyone else pays it] is not important right now if you assume the bail-in is the next step.

Someone asked if anyone has transferred money recently due to bail-in-nervousness.

Yes, I transferred 90k+ to a Barclays euro account last week which I had created months ago for this purpose. Sole reason to "protect" [keep below the bail-in limit] another small chunk. Despite the fact it is 0% interest and costs 15 quid to transfer back to my eurozone current account and I was getting 0.1% in my eurozone savings. Protection costs [but only a little].
Problem for me is that I have many times that in unprotected euros still. Annoying from Barclays is that the buggers charged 6 quid going in as well. A transfer under 50k is free so if I'd done two transfers it was free. I had read it but forgot, small things and small charges lose companies a lot of goodwill.

Anyway I agree sleeping easy at night is the target and I need to diversify but everything has it's own risk and both shares and property are priced very high and arguably in a bubble most everywhere so no easy choices.

I have a flat in a South American capital and I'm considering spending 50k+ on local art and leaving it there [uninsured and unattended so also a risk but a different risk]. Need to remember to give my [scratch that, a] London address for the receipts. At least it would have helped the artists if lost. Anything better than the bankers stealing it whether they do so slowly or overnight.

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2 hours ago, jiltedjen said:

The limit has been tested before and proven to be worthless it’s just a confidence trick. 

they have bailed in below the 85k limit before. They sure as hell will do it again. You would be moronic not to think they would. 

you can’t protect your money fully, just don’t be ‘full retard’. You should actually have a balanced portfolio with good % in gold, bonds, shares, cash (and a little pinch of bitcoin) that way if they rob your bank savings, the value of your other assets adjust to leave you where you started prior to the bail-in of your bank savings. 

a massive percentage of people are in debt, and have very little in their accounts. bail-ins would be seen as making the ‘rich’ pay for bailing out the banks. as horrible as that it given that debt heads get bailed out again. Moral hazard. But sadly politically acceptable, obviously the real rich would be diversified and not actually hit. the sheep who dare to step out of line (us on HPC) get battered. 

life is stressful enough, having a balanced portfolio makes me sleep easy, there is a short term cost to doing so (less exposure to booming shares) but it’s well worth my mental health and a sense of security. and long term should prove the better strategy. 

I agree with most of this [except that I don't share the conclusion that the limit has proven to be worthless .... yet ! ].

It's partly about having taken whatever precautions possible [not being full retard]. At the end of the day Lizzie, HER government or HER army will take whatever you have on this island if they want to. Ditto anybody anywhere with enough guns. If that happens I would feel less dissappointed in myself for screwing it all up and losing everything than knowing about bail-in rules and having so much cash bailed-in that I end up in poverty.

IOW it's about feelings and sleeping well not practicality.

I have so far chosen not to fill up or pay voluntarily to add to my 3 or 4 years UK NI-pension contriubutions now I am back here after years abroad. Reason was that I don't want to scrounge off the state and have enough to take care of myself with no pension at all. Buying an annuity at 75 would take care of the uncertainties/possible luck [?] of enormous age. Given what THEY are plotting now, I think I may reverse that decision this tax year and get at least a partial state pension - also a form of diversity in my position. Also protected cash and a different promise they have to break to steal it.

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1 hour ago, jiltedjen said:

Cyprus 

they just turned a load of peoples savings to bank shares. even under the 100 euro limit. 


would you really trust the government or bankers not to bail in savings to save their own wages and asset prices, The people who benefit from such a bail in (and don't loose) are the people making the decisions about doing it.

I thought you would quote Cyprus but actually, that did not happen. Yes,the Cypriot government was hoping to do that through a tax, but what actually happened was a bail-in above  €100,000 and bondholders. The Cypriot plan was soon knocked down once the grown-ups flew in who actually knew their way around a bail-in plan and they were told that the plan to protect the bondholders through a tax on deposits was a non-starter. 

Even then, it was a relatively small percentage bail-in and the international transfer restrictions were soon lifted.

So if that is your evidence, the £85k has not been overridden. And there is no likelihood that it ever will be, in my opinion. 

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13 hours ago, ebull said:

 

Thanks for all that.

So, the difference between an amount above the bail-in-limit [which will be zero if proposal happens] in a bank and that amount in NSI is that the system for banks to take it when they next need a bail-in is all in place and rules drawn up. Perfectly predictable and documented and you get told about again and again when opening an account. If [when] the SHTF it's what they have said they will do.

For them to take NSI they have to do something which does not yet exist. They could / may as well confiscate all shares, gold, real estate and other property at the same time.

I feel the conclusion is the bail-in-limit matters for this reason.

 

The important difference is that money is a government 'promise to pay' (as it's fiat currency, they only promise to pay you more of their 'promises to pay' but let's not get hung up on that right now) .. whereas bank credit is the bank promising to pay you the governments 'promises to pay' when you ask them to.

 

The bank may not actually hold enough government promises to pay when you ask them to pay up - eg. Potential runs on the bank - whereas the government can just print money if necessary.  Therefore, much lower risk lending to a government with a sovereign currency than a bank - that's why governments can borrow money in their sovereign currency at lower interest rates than anyone else.  Indeed, they can print money to buy their own debt obligations with QE and artificially repress interest rates by reducing their own borrowing costs to near zero.

If a bank were to fail, it's bad news but theoretically survivable for the wider currency.  Creditors of the bank - depositors in the context of this thread  - are going to be in a state of some uncertainty though and face losing some or all of their 'cash'.  At the very least, it could be a long time before they can access it.

But if it gets to the point where the Government are defaulting then their entire sovereign fiat currency is a bust and you've lost all your currency based savings anyway - be it cash notes, bank savings or NS&I bonds.

 

 

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just be well positioned and diversified. There is no sure fire way to actually 100% protect wealth. But you can buy insurance with a permanent portfolio.

for now having large sums in the banks is not always a great idea, but its not that hard as others have posted to spread it out a bit. Even abroad. Or over several banks.

The rules will be changed when the banks need it though, the bail ins will happen. They might says 85k is a total across all bank accounts, including smaller sums stored in 3 party accounts which are under your control (cash sitting in share dealing accounts for example). Or even look back at money moved abroad. especially if its obvious people have caught wind of whats coming.

Its a pretty simple calculation for the bail in rules, we will need X amount, so we need to take Y% percentage of money over Z amount in accounts to meet the cost, if required you will find a percentage of your money under the 85k limit gets turned into (now worthless) bank shares.  

The whole 85k limit is not something they would want to mess with if they can avoid it, but it acts as a bloody clear warning that they are prepared to take anything above it.  Wheres the guarantees that they will never steal your money full stop? 

its like trusting someone who says 'i'm going to rob you, but only everything on the top floor, you can keep the rest' then handing them your keys, they said they wouldn't take anything else after all, its not like they have robbed us all previously (although indirectly). 

sending out all the leaflets and advertising about the limit stinks to me, why do they feel the need to tell people that? 

hard to tell if the banks will melt-down again, there was another bail-out of a large bank not that many years ago, which we only found out about much later (at the time no-one knew). Personally i dont think in the UK of all places they will actually need to bail in, but if they ever do don't trust the bail in limit at all, i consider that total ********, a lie, a confidence trick. 

my worthless 2p. 

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1 hour ago, jiltedjen said:

just be well positioned and diversified. There is no sure fire way to actually 100% protect wealth. But you can buy insurance with a permanent portfolio.

for now having large sums in the banks is not always a great idea, but its not that hard as others have posted to spread it out a bit. Even abroad. Or over several banks.

The rules will be changed when the banks need it though, the bail ins will happen. They might says 85k is a total across all bank accounts, including smaller sums stored in 3 party accounts which are under your control (cash sitting in share dealing accounts for example). Or even look back at money moved abroad. especially if its obvious people have caught wind of whats coming.

 

There is no suggestion that that the rules "will be changed" - I suggest that this is just conjecture and modest paranoia. As established above, no one has yet been bailed in below £85k, and barely anyone above it - I do not think that the recent Italian bail-ins had much impact on retail depositors. As for cash sitting in share dealing accounts, this is covered by the CASS rules - it is not lent to the bank, but rather held by them in trust - they have no legal right to the funds.

Quote

out all the leaflets and advertising about the limit stinks to me, why do they feel the need to tell people that? 

Because during the financial crisis many people did withdraw their money and to reduce the risk of runs, the regulator instructed the banks to tell people on a modestly regular basis about the FSCS protection limits.

Quote

hard to tell if the banks will melt-down again, there was another bail-out of a large bank not that many years ago, which we only found out about much later (at the time no-one knew).

Any chance you could remind us who?

Quote

my worthless 2p. 

Do you have £85,000.02 in a very high risk bank?

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10 hours ago, GreenDevil said:

This is effectively capital controls. If a bank goes under you have no right to your capital. Just a dribble of 200 per week out of the cash till to stop the street violence.

When you deposit money with a bank it stops being your capital and you become a creditor of the bank:

Money in the modern economy: An introduction (pdf).

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10 hours ago, ebull said:

Cyprus was before the 2016 bail-in system was created AFAIR, certainly before it came into effect. It was also politically more acceptable because many of those hit were Russians. Although I suspect the biggest players including Russians were helped to exit before the meltdown. Not healthy to piss off super-rich-Russians. No problem to nick savings off the lower echelons.

There were also bail-ins of Spanish struggling bank[s?] this or last year but they applied the rules and retail savers did not get hit, those further up the risk ladder did [shareholders and some bondholders?]. Maybe that's why they want to "review the system" now?

The reason I describe this as a bail-in-limit rather than a guarantee is that in a likely partial meltdown, the first step will be kick the can using the bail in rules. The second step although it could be immediate for a particularly bad bank that is smaller / not TBTF is payment of compensation.

Ability to pay the guarantee or print it [everyone else pays it] is not important right now if you assume the bail-in is the next step.

Someone asked if anyone has transferred money recently due to bail-in-nervousness.

Yes, I transferred 90k+ to a Barclays euro account last week which I had created months ago for this purpose. Sole reason to "protect" [keep below the bail-in limit] another small chunk. Despite the fact it is 0% interest and costs 15 quid to transfer back to my eurozone current account and I was getting 0.1% in my eurozone savings. Protection costs [but only a little].
Problem for me is that I have many times that in unprotected euros still. Annoying from Barclays is that the buggers charged 6 quid going in as well. A transfer under 50k is free so if I'd done two transfers it was free. I had read it but forgot, small things and small charges lose companies a lot of goodwill.

Anyway I agree sleeping easy at night is the target and I need to diversify but everything has it's own risk and both shares and property are priced very high and arguably in a bubble most everywhere so no easy choices.

I have a flat in a South American capital and I'm considering spending 50k+ on local art and leaving it there [uninsured and unattended so also a risk but a different risk]. Need to remember to give my [scratch that, a] London address for the receipts. At least it would have helped the artists if lost. Anything better than the bankers stealing it whether they do so slowly or overnight.

What are you doing on this forum? Next thing you'll be telling us is that you have a property portfolio in this country!

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39 minutes ago, ExiledMatty said:

What are you doing on this forum? Next thing you'll be telling us is that you have a property portfolio in this country!

Might as well join the rest of the propertdee hoarders, as you know the the only way is up for propertdee?

Buy before its too late, not seem any drop on the sort of 4 bed family homes i want to buy, up,up,up

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7 hours ago, jiltedjen said:

They might says 85k is a total across all bank accounts, including smaller sums stored in 3 party accounts which are under your control (cash sitting in share dealing accounts for example).

This would bring everything grinding to a halt. If brokerage account aren't safe, there would be no liquidity. Margin calls would force selling, but buyers wouldn't have the cash to buy. Since one thing the elites do need is functioning financial markets, my hope is brokerage accounts would be safe - assuming the broker themselves is financially sound and not exposed to customer leverage like the forex and spread betting firms can be.

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1 hour ago, ExiledMatty said:

What are you doing on this forum? Next thing you'll be telling us is that you have a property portfolio in this country!

Thanks for the reminder. Won't be telling you anything, I'm afraid.

1 hour ago, GreenDevil said:

Might as well join the rest of the propertdee hoarders, as you know the the only way is up for propertdee?

Buy before its too late, not seem any drop on the sort of 4 bed family homes i want to buy, up,up,up

You both make odd and false assumptions.

I believe there are lots of folk posting on this forum who can buy outright in the UK for cash.

Being either poor or homeless are not criteria for posting here last time I looked.

Even you could choose to pay 50 quid for a chocolate bar. But you don't.

If I said I had a flat in Sunderland you wouldn't be making assumptions, would you? I'll indulge you with some info:

A flat in some S.American capitals can still be had in mid class areas where the professions live, not where the mega rich or expats live for 50k ish. It's just another indication of how overpriced the UK is.

But ....

In the parts of the city where you're attacked on sight [really] you can probably buy for 5k, maybe 2.

Even in the safer areas you need to know what direction not to walk. It's getting better and some countries are pretty OK but S. America is not for the weak of spirit. Wonderful food and lovely people though.

Hope that helps. I recommend expanding your horizons.

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6 hours ago, Ah-so said:

As for cash sitting in share dealing accounts, this is covered by the CASS rules - it is not lent to the bank, but rather held by them in trust - they have no legal right to the funds.

Does this mean if you had say 500k in a share dealing account and all banks in  a country are recapitalising using bail-in rules, your 500k will be untouched / protected / safe ?

When banks are offering so close to 0% and a non-negligable risk of bail-in, keeping spare cash in a share dealing account looks comparitively rather attractive if you want to hold cash. Or do they not allow it to remain there without buying shares/bonds for longer than a month or two?

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I think brokerage accounts are happy for you to keep your cash there, so you can trade with it at some point. or if you're trading futures or options, you might hold more cash than the net liquidation value of your account due to money received for short positions yet to be covered.

The paperwork for my Interactive Brokers account talks about being protected up to £50k ( from memory, I may well be wrong ), and I understand brokerages accounts in the US are covered to a larger amount.. around $250k I think?  I'm not sure how that applies to cash vs net liq value though. I should really look into it.

One possibility that did occur to me if free cash was at risk, would be to create a hedged market neutral position. Long stock, short stock futures kind of thing, so market fluctuations don't actually affect the account value.  So many ways to tie up cash at low risk, I can't see how they would operate a brokerage bail in, even if they wanted to.

 

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10 hours ago, fru-gal said:

Just noticed that NS&I premium bonds rate has gone up to 1.4% from 1.1% starting from December and the odds of winning has dropped from 1/30,000 to 1/24,000. That's better than most instant access savings accounts at the moment (for large amounts of savings).

getting on average 50 to 100 a month winnings on 50k .  at least it gives some hope you may win something substantial rather than nothing in a savings account.

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7 hours ago, ebull said:

Does this mean if you had say 500k in a share dealing account and all banks in  a country are recapitalising using bail-in rules, your 500k will be untouched / protected / safe ?

When banks are offering so close to 0% and a non-negligable risk of bail-in, keeping spare cash in a share dealing account looks comparitively rather attractive if you want to hold cash. Or do they not allow it to remain there without buying shares/bonds for longer than a month or two?

Brokerage accounts tend to charge a few, but it should be a fixed charge. It is an ideal alternative to a bank account if you are concerned about a bank failure and the FSCS.

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On 20/11/2017 at 11:43 AM, Errol said:

The main bit for NS&I/Premium bonds is the part where the Treasury reserves the right to amend any and or all terms and conditions for any reason and at any time.

This would naturally be used to suspend redemption, change values, or pretty much anything else you can dream up.

I wonder who is the priority creditor the person who has stumped up real cash to prop up the system in NS and I bonds or the recipients of the State Ponzi in public sector final salary pension schemes. Just wonder which one politicians will sacrifice first. Can't see a McDonnel Corbyn Axis putting their seven figure pots on the table before real savings somehow.

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21 hours ago, fru-gal said:

Just noticed that NS&I premium bonds rate has gone up to 1.4% from 1.1% starting from December and the odds of winning has dropped from 1/30,000 to 1/24,000. That's better than most instant access savings accounts at the moment (for large amounts of savings).

Excellent ... I've been getting about £75 a month on average so far from my PBs  since I shifted cash out of savings accounts where my bank had foolishly decided to lower interest rates to 0.1%  (said bank has since had to raise them to 1.25%, but my cash is staying in NS&I).

On average, PBs  will return around the same as bank interest payments but of course with a chance of returning nothing at all.  On the other hand, you might get lucky and win a large amount and it's as close to zero risk as you can have with 'cash' savings.

If you just want to park tens of thousands of quid somewhere safe, on the sidelines waiting for an opportunity to buy a house, then they are a no-brainer IMO.

 

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