We all remember what happened when major banks were “bailed out” during the last financial crisis.  A tremendous amount of taxpayer money was given to the big banks to help prop them up so they wouldn’t fail.  This greatly upset a lot of people.

Well, when the next great financial crisis hits Europe, banks are not going to get “bailed out” this time.  Instead, we are going to see “bail-ins”.

So precisely what is a “bail-in”?  Essentially, what happens is that wealth is transferred from the “stakeholders” in the bank to the bank itself in order to keep it solvent.  That means that creditors and shareholders could potentially lose everything if a major bank in Europe fails.  And if their “contributions” are not enough to save the bank, those holding private bank accounts will have to take “haircuts” just like we saw in Cyprus.  In fact, the travesty that we witnessed in Cyprus is being used as a “template” for much of the new legislation that is being enacted all over Europe.

The bottom line is that not a single bank account in the European Union will ever be truly safe again.

By this time, everyone in the EU was already supposed to have enacted “bail-in” legislation, but some countries in Europe have been dragging their feet.  So now the European Commission (the executive body of the European Union) is giving them a hard deadline.  According to Reuters, any nation that has not passed “bail-in” legislation within two months will be subject to legal action…

The European Commission on Thursday gave France, Italy and nine other EU countries two months to adopt new EU rules on propping up failed banks or face legal action.

The rules, known as the bank recovery and resolution directive (BRRD), seek to shield taxpayers from having to bail out troubled lenders, forcing creditors and shareholders to contribute to the rescue in a process known as “bail-in”.

So which countries are being threatened?

It turns out that there are 11 of them.  The following comes from Mark O’Byrne…

The article “EU regulators tell 11 countries to adopt bank bail-in rules” reported how 11 countries are under pressure from the EC and had yet “to fall in line”. The countries were Bulgaria, the Czech Republic, Lithuania, Malta, Poland, Romania, Sweden, Luxembourg, the Netherlands, France and Italy.

France and Italy are two countries who are regarded as having particularly fragile banking systems.

But why only two months to get this done?

When I was in law school, I took an entire course on European Union law.  Normally, things in Europe take a very long time to get done.  It is out of character for the European Commission to rush to get something like this done so quickly.

Could they be anticipating that this legislation will need to be put into use very soon?

What we do know is that bonds in Europe have already been crashing, and it appears that the European Central Bank is starting to lose control over European financial markets.

And we also know that there has been a sustained bank run in Greece.  In fact, it is being reported that 700 million euros were pulled out of Greek banks on Friday alone.  Personally, I think that anyone that still has any money in Greek banks is absolutely insane.  Some day in the not too distant future, Greek bank account holders are going to be in for a “haircut” just like we saw in Cyprus.  The following comes from Zero Hedge…

While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse.

As a reminder, Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced “bail in” deposit haircut a la Cyprus.

But of course Greece will only be just the beginning.  In the end, I expect major banks to fail all over Europe as we head into the greatest financial crisis that Europe has ever seen.  Bank account holders all over the continent could end up having to take “haircuts”, and that would just make the coming deflationary cycle in Europe a lot worse.

And I actually expect events in Europe to start accelerating greatly by the end of this calendar year.  Apparently the top dogs in the European Union are also concerned about the immediate future, because they are rushing to get “bail-in” legislation passed in every nation in the EU by the end of the summer.

Fortunately, the United States has not moved in a similar direction – at least not yet.  It is always possible that during an “emergency situation” anything can happen.  We saw that in Cyprus.  But for the moment, European bank accounts appear to be more vulnerable than U.S. bank accounts.

Not that any of us should have much confidence in the major banks in the United States either.  Since the end of the last financial crisis they have become more reckless than ever.  At this point, the six largest banks in this country collectively have 278 trillion dollars of exposure to derivatives.  A day is coming when the “too big to fail” banks will actually start failing, and that will absolutely cripple our economy.

We are moving into a time of great financial instability.  During such a time, one of the keys will be to not have all of your eggs in one basket.  That way it will be more difficult for your wealth to be wiped out by a single event.

So what other advice would you give to people that are wondering how to deal with the coming global banking crisis?  Please feel free to add to the discussion by posting a comment below…

The post Why Is The EU Forcing European Nations To Adopt ‘Bail-In’ Legislation By The End Of The Summer? appeared first on The Economic Collapse.

Amazingly, this announcement received very little notice in the international media.  The fact that bank account confiscation will now be a permanent part of the plan to bail out troubled banks in Europe should have made headline news all over the globe.  The following is how CNN described the plan…

European Union finance ministers approved a plan Thursday for dealing with future bank bailouts, forcing bondholders and shareholders to take the hit for bank rescues ahead of taxpayers.

The new framework requires bondholders, shareholders and large depositors with over 100,000 euros to be first to suffer losses when banks fail. Depositors with less than 100,000 euros will be protected. Taxpayer funds would be used only as a last resort.

According to this new plan, bondholders will be the first to be required to “contribute” when a bank bailout is necessary.

Do you want to guess what that is going to do to the price of European bank bonds?

Shareholders of the bank will be the next in line to get hit when a bank bailout happens.

After that, they will go after those that have more than 100,000 euros in their bank accounts.

EU officials say that such a plan is needed because bailing out banks with taxpayer money was creating too many problems…

The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, using taxpayer cash but struggling to contain the crisis and – in the case of Ireland – almost bankrupting the country.

But a bailout of Cyprus in March that forced losses on depositors marked a harsher approach that can now, following Thursday’s agreement, be replicated elsewhere.

Oh wonderful – the “Cyprus solution” can now be “replicated” everywhere in Europe.

This plan will now be submitted to the European Parliament for final approval.  The goal is to have this plan finalized by the end of this year.

If you have a bank account in Europe with over 100,000 euros in it, get your money out now.

I am not sure how else to say it.

In Cyprus, there were retirees and small businesses that lost hundreds of thousands of euros overnight.

Do not let that happen to you.

And without a doubt, we are going to see a lot of banks fail in Europe over the next few years.  This will especially be true once the next great financial crisis strikes.

But even though we haven’t even gotten to the next great financial crisis yet, the economic depression in Europe just continues to get even worse.  Just consider these facts…

-Car sales in Europe have hit a 20 year low.

-Overall, the unemployment rate in the eurozone is sitting at 12.2 percent.  That is a brand new all-time record high.

-An average of 134 retail outlets are shutting down in Italy every single day.  Overall, 224,000 retail establishments have closed down in Italy since 2008.

-It is being projected that Italy will need to ask for an EU bailout within 6 months.

-Consumer confidence in France has dropped to an all-time low.

-The unemployment rate in France is up to 10.4 percent.  That is the highest that it has been in 15 years.

-Government is now responsible for 57 percent of all economic output in France.

-In May, household lending in Europe declined at the fastest pace in 11 months.

-During the first quarter, disposable income in the UK declined at the fastest pace in 25 years.

-It is being projected that the unemployment rate in Spain will hit 28.5 percent next year.

-Just a few years ago, the percentage of bad loans in Spain was under 2 percent.  Now it is sitting at 10.87 percent.

-The national debt in Spain has grown by 19.1 percent over the past 12 months alone.

-The Greek government says that the Greek economy will shrink by 4.5 percent this year.

-It is being projected that the unemployment rate in Greece will rise to 30 percent in 2014.

And it certainly does not help that China has essentially declared a trade war on Europe.  That is not going to help struggling European industries at all.

I hope that more Americans will start paying attention to what is happening in Europe.  The crippling economic problems that are sweeping across that continent will come here too.

And at some point there is a very good chance that we will also see Cyprus-style bank account confiscation in this country.

So don’t put all of your eggs in one basket.  It is good to have your assets spread around a bunch of different places.  That makes it much harder for them to be wiped out all at once.

What we are watching in Europe right now is really unprecedented in modern times.  They are declaring open season on large bank deposits.  In the end, a lot of people in Europe are going to lose a lot of money.

Make sure that you are not one of them.

The post New EU Plan Will Make Every Bank Account In Europe Vulnerable To Cyprus-Style Wealth Confiscation appeared first on The Economic Collapse.

What you are about to see absolutely amazed me when I first saw it.  The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.

The following comes from pages 144 and 145 of “Economic Action Plan 2013” which you can find right here.  Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…

Canada’s large banks are a source of strength for the Canadian economy.  Our large banks have become increasingly successful in international markets, creating jobs at home.

The Government also recognizes the need to manage the risks associated with systemically important banks — those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy.  This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.

So if taxpayer funds will not be used to bail out the banks, how will it be done?  Well, the Canadian government is actually proposing that a “bail-in” regime be implemented…

The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into 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.

So if the banks take extreme risks with their money and lose, “certain bank liabilities” (i.e. deposits) will rapidly be converted into “regulatory capital” and the banks will be saved.

In other words, the banks will just be allowed to grab money directly out of your bank accounts to recapitalize themselves.

That may sound completely and utterly insane to us, but this is how things will now be done all over the western world.

Sometimes a “bail-in” can be done by just converting unsecured debt into equity, but as we just saw in Cyprus, often when there is a major bank failure a lot more money is required to “fix the banks” than can possibly be raised by converting unsecured debt into equity.  That is when it becomes very tempting to dip into uninsured back accounts.

In fact, some European politicians are openly admitting as much.  According to RT, the European Parliament will soon be voting on a new law which will make Cyprus-style bank account confiscation a permanent part of the solution when major banks fail throughout the EU…

A senior lawmaker told Reuters the Cyprus model may not be an isolated case, and is perhaps a future template in dealing with troubled European banks.

The new template is now likely to turn into a full-scale EU law, letting taxpayers off the hook in case a bail-out is needed, but imposing major losses on bigger savers on a permanent basis.

“You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, member of European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks, Reuters reported.

“Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed the idea.

The European Commission has written the draft of the law, which now awaits approval from eurozone member states and the parliament on whether and when it can be implemented. It’s been reported, the law is planned to take effect in the beginning of 2015.

Are you starting to understand?

The other day when I said that “The Global Elite Are Very Clearly Telling Us That They Plan To Raid Our Bank Accounts“, I was not exaggerating.

And for those in Cyprus with deposits of over 100,000 euros, the news just keeps getting worse and worse.

When the crisis first erupted, they were told that 10 percent of all deposits over 100,000 euros would be confiscated.

Then a few days later they were told that it would be 40 percent.

Now, according to the Washington Post, those with deposits over 100,000 euros at the second largest bank in Cyprus may lose as much as 80 percent of those deposits…

A deal was finally reached in Brussels with other euro countries and the International Monetary Fund early Monday. The country’s second-largest bank, Laiki, is to be split up, with its healthy assets being absorbed into the Bank of Cyprus. Savers with more 100,000 euros ($129,000) in either Bank of Cyprus and Laiki will face big losses. At Laiki, those could reach as much as 80 percent of amounts above the 100,000 insured limit; those at Bank of Cyprus are expected to be much lower.

Sadly, the truth is that those people will be lucky to ever see any of that money ever again.

How would you feel if someone came along and wiped out your life savings so that banks that took incredibly reckless risks could be bailed out?

Needless to say, a lot of people in Cyprus are very, very angry right now.  The following reactions from outraged depositors in Cyprus are from Sky News…

“They have stolen our money,” Milton Loucas told Sky News.

“I have been working for 60 years. I am 80 years old. I cannot work again for my living – they have cut the lot.

“Our money, our social insurance – they have cut them. How are we going to live?”

Another Cypriot, Stelios, came out of the bank empty handed.

“I tried to get my February wages and they gave me a piece of paper only,” he said.

“I have two children in the army and they asked for money – I don’t have money to give them.

“The Government didn’t pay anybody. My old parents didn’t get their pension.”

A lot of people have just had their entire lives turned upside down.

But there were some people that were told ahead of the crisis and were able to get their money out in time.

According to the BBC, foreigners pulled a whopping 18 percent of their money out of Cyprus banks during the month of February alone…

Information from the Central Bank of Cyprus released on Thursday showed that foreign depositors had already withdrawn 18% of their cash from the nation’s banks during February, before the current crisis hit home.

So how did they know to pull their money out and who told them?

In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down.  So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to.  It is hard to even find the words to describe how unfair that is.  The following is from a recent article by Mark J. Grant…

So let us then turn back to Cyprus and see why the Russians are not quite so upset as they were at the beginning of the crisis. The answer to this question is Uniastrum bank which is headquartered in Moscow. Eighty percent (80%) is owned by the Bank of Cyprus. After the crisis began and right up until the capital controls were implemented the bank was open for business with no restrictions upon withdrawals. So the crisis began, was all over the Press and the Russian depositors walked into the local bank and withdrew their money from Uniastrum, the Bank of Cyprus, or had it wired in from the other local Cyprus banks and it was then withdrawn. Problem solved!

At the same time Laiki bank and the Bank of Cyprus had operating branches in London. There were no restrictions there either so people could walk into those banks and withdraw their money as well. No restrictions at all right up until the time of the Capital Controls. In the meantime, in Cyprus, people and institutions could not get at their money so the Russians and many British took out their money, closed their accounts while the people in Cyprus were left high and dry.

The wealthy always seem to come out ahead somehow, don’t they?

Meanwhile, those in Cyprus with deposits under 100,000 euros are now dealing with some very stringent capital controls.  In other words, there are some very tight restrictions on what they can do with their money.  For example, the maximum daily cash withdrawal has been set at 300 euros.  The following are some of the other restrictions that are in force right now…

As well as the daily withdrawal limit, Cypriots may not cash cheques.

Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to 5,000 euros per person per month.

Transactions of 5,000-200,000 euros will be reviewed by a specially established committee, with applications for those over 200,000 euros needing individual approval.

Travellers leaving the country will only be allowed to take 1,000 euros with them.

When the next great wave of the economic collapse strikes, capital controls and bank account confiscation will suddenly become “normal” all over the world.

So get prepared while you still can.

One thing that you can do is make sure that you don’t have all of your eggs in one basket.  The following is what Jim Rogers recently told CNBC…

“I, for one, am making sure I don’t have too much money in any one specific bank account anywhere in the world, because now there is a precedent,” he said. “The IMF has said ‘sure, loot the bank accounts’ the EU has said ‘loot the bank accounts’ so you can be sure that other countries when problems come, are going to say, ‘well, it’s condoned by the EU, it’s condoned by the IMF, so let’s do it too.'”

The more places that you have your money, the more difficult it will be for “the powers that be” to loot it.

The global elite are fundamentally changing the game.  From now on, no bank account on earth will ever be able to be considered “100% safe” again.  This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.

Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.

None of us will ever be able to have confidence in our bank accounts again, and I fear that the next wave of the economic collapse may be closer than I had first anticipated.

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