Skip to content

The Most Important News

  • My New Book
  • My Other Books
  • Emergency Food
  • Water Filtration
  • EMP Protection
  • Most Important
  • Donate

January 1, 2016: The New Bank Bail-In System Goes Into Effect In Europe

December 28, 2015
FacebookTwitter

2016 Sign - Public Domain

If you have a bank account anywhere in Europe, you need to read this article. On January 1st, 2016, a new bail-in system will go into effect for all European banks. This new system is based on the Cyprus bank bail-ins that we witnessed a few years ago. If you will remember, money was grabbed from anyone that had more than 100,000 euros in their bank accounts in order to bail out the banks. Now the exact same principles that were used in Cyprus are going to apply to all of Europe. And with the entire global financial system teetering on the brink of chaos, that is not good news for those that have large amounts of money stashed in shaky European banks.

Below, I have shared part of an announcement about this new bail-in system that comes directly from the official website of the European Parliament. I want you to notice that they explicitly say that “unsecured depositors would be affected last”. What they really mean is that any time a bank in Europe fails, they are going to come after private bank accounts once the shareholders and bond holders have been wiped out. So if you have more than 100,000 euros in a European bank right now, you are potentially on the hook when that bank goes under…

The directive establishes a bail-in system which will ensure that taxpayers will be last in the line to the pay the bills of a struggling bank. In a bail-in, creditors, according to a pre-defined hierarchy, forfeit some or all of their holdings to keep the bank alive. The bail-in system will apply from 1 January 2016.

The bail-in tool set out in the directive would require shareholders and bond holders to take the first big hits. Unsecured depositors (over €100,000) would be affected last, in many cases even after the bank-financed resolution fund and the national deposit guarantee fund in the country where it is located have stepped in to help stabilise the bank. Smaller depositors would in any case be explicitly excluded from any bail-in.

And as we have seen in the past, these rules can change overnight in the midst of a major crisis.

So they may be promising that those with under 100,000 euros will be safe right now, but that doesn’t necessarily mean that it will be true.

It is also important to note that there has been a really big hurry to get all of this in place by January 1. In fact, at the end of October the European Commission actually sued six nations that had not yet passed legislation adopting the new bail-in rules…

The European Commission is taking legal action against member states including the Netherlands and Luxembourg, after they failed to implement rules protecting European taxpayers from funding billions in bank rescues.

Six countries will be referred to the European Court of Justice (ECJ) for their continued failure to transpose the EU’s “bail-in” laws into national legislation, the European Commission said on Thursday.

So why was the European Commission in such a rush?

Is there some particular reason why January 1 is so important?

This is something that I will be watching.

Meanwhile, there have been major changes in the U.S. as well. The Federal Reserve recently adopted a new rule that limits what it can do to bail out the “too big to fail” banks. The following comes from CNN…

The Federal Reserve is cutting its lifeline to big banks in financial trouble.

The Fed officially adopted a new rule Monday that limits its ability to lend emergency money to banks.

In theory, the new rule should quash the notion that Wall Street banks are “too big to fail.”

If this new rule had been in effect during the last financial crisis, the Federal Reserve would not have been able to bail out AIG or Bear Stearns. As a result, the final outcome of the last crisis may have been far different. Here is more from CNN…

Under the new rule, banks that are going bankrupt — or appear to be going bankrupt — can no longer receive emergency funds from the Fed under any circumstances.

If the rule had been in place during the financial crisis, it would have prevented the Fed from lending to insurance giant AIG (AIG) and Bear Stearns, Fed chair Janet Yellen points out.

So if the Federal Reserve does not bail out these big financial institutions during the next crisis, what is going to happen?

Will we see European-style “bail-ins” when large banks start failing?

And exactly what would such a “bail-in” look like?

Earlier this year, I discussed the concept of 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.

Many Americans assume that when they put money in the bank that they have a right to go back and get “their money” whenever they want. But if we all went to the bank at the same time, there wouldn’t be nearly enough money for all of us. The reason for this is that the banks only keep a small fraction of our money on hand to satisfy the demands of those that conduct withdrawals on a day to day basis. The banks take the rest of the money that we have deposited and use it however they think is best.

If you have money at a bank that goes under, that bank will still be obligated to pay you back, but it may not be able to do so. This is where the FDIC comes in. The FDIC supposedly guarantees the safety of deposits in member banks, but at any given time it only has a very, very small amount of money on hand.

If some major crisis comes along that causes banks all over the United States to start falling like dominoes, the FDIC will be in panic mode. During such a scenario, the FDIC would be forced to ask Congress for a massive amount of money, and since we already run a giant deficit every year the government would have to borrow whatever funds would be required.

Personally, I find it very interesting that we have seen major rule changes in Europe and at the Federal Reserve just as we are entering a new global financial crisis.

Do they know something that the rest of us do not?

Be very careful with your money, because I am convinced that “bank bail-ins” will soon be making front page headlines all over the world.

(Originally published on The Economic Collapse Blog)

Categories Money, World Tags 2016, Bail Out The Banks, Bank, Bank Account, Bank Bail-In, Bank Bail-Ins, Banks, European, European Banks, Euros, Financial, Global, Global Financial System, Large Amounts Of Money, Money
Post navigation
You Could Be Fined 250,000 Dollars If You Offend A Transgender Woman In New York City
Why You Need To Know Where Your Meat Comes From
Trump Urged to Make Pardons, Commutations, More Regular to Reverse Decades of DOJ Abuses
This Is Where Millionaire Populations Are Growing
Airlines face investors after strong— but cheaper — July 4 holiday
Video reveals TikToker was minutes away from death…but can you spot why?
U.S. payrolls increased by 147,000 in June, more than expected
Swiss Town Bans French Youths From Outdoor Pool After Surge In Harassment And Disorder
Update your browser NOW: Google Chrome is hit by a serious security flaw - and hackers have already exploited it
U.S. Employers added 147,000 jobs in June
ACLU sues to block ICE raids in Southern California, alleging constitutional violations
Job growth picked up in June despite economic uncertainty
HHS Cracks Down on Planned Parenthood’s Smut-Filled Sex Ed Programs with Defunding Warning
Trump $3.3T megabill sets House record for longest vote in history
Stocks making the biggest moves premarket: Synopsys, Tripadvisor, Datadog, Robinhood and more
Judge Rejects Request from Boulder Terror Suspect’s Family: Deportation for All of Them Next?
Nature views, therapy llamas and 'impeccable' bathrooms give boost to 'best' airports
Why Syria plays a key role in Trump’s plans for Middle East peace
Chinese coffee giant makes bold move into Starbucks territory with NYC debut
Beach accident near Hilton Head kills two, injures others
Trump’s Approval Among Republicans Surpasses Reagan, According to CNN — 63% of GOP Strongly Approve of His Leadership.
Apple's China iPhone sales grows for the first time in two years
Like Google, China's biggest search player Baidu is beefing up its product with AI to fight rivals
'Disappointing' DOGE: Federal workforce shrinking by just 1% shows bureaucracy's entrenchment, experts say
Chicago drive-by shooting leaves at least 4 dead, 14 wounded
Rep. MTG to introduce bill requiring proof of citizenship to vote, new census that only counts citizens
Israel fighting 'very tough' war in Gaza, retired British Army colonel says
Liverpool soccer player Diogo Jota dead at 28, weeks after winning Premier League and getting married
UN expert repeats Israel 'genocide' claims after US calls for her removal
Waitrose of the North confirms store closure with Tesco set to take over site
Waitrose of the North confirms store closure with Tesco set to take over site
Illy: Planning to Produce More Products in the US
4 dead, 14 wounded in Chicago mass shooting: Police
Trump’s Winning Streak May Soon Face Obstacles
LA Business Owners Issue Warning About Devastating Consequences of Insane New Minimum Wage Law
Trump chose country over comfort — just like the Founding Fathers once did
Resurfaced video shows NYC mayoral hopeful saying he wants to replace private homes with communal living
Pork chop on a stick, bacon-wrapped Twinkie and other odd foods dominate iconic state fair
Fireworks sales boom as Americans gear up for Fourth of July celebrations
This North Carolina woman says her car caught fire after dealership visit — while her daughter was still in it
2 Beaten-Down Stocks With Massive Upside Potential
Retiring in Your 50s Is the American Dream for Many — 5 Budget Tips To Make It a Reality
House advances Trump's massive agenda bill after fiscal hawks cave and more top headlines
Russian general killed in Ukrainian Himars strike
What the U.S.-Vietnam trade deal tells us about the future of tariffs
“Trump Might Be Unstoppable”: Corporate Media Admits the Cold, Hard Truth as Trump Keeps on WINNING
Leftist “Experts” Say Americans Bear the Cost of Trump’s Tariffs, but Japan’s Struggling Auto Industry Says Otherwise
Guard against market volatility in the second half with ‘boring’ stocks, investor Jeff Kilburg says
Trump Announces Trade Deal with Vietnam: 20% Tariff on Vietnam, Zero on U.S.
WATCH: Five-story building collapses into river in southern China
Now experts u-turn and say you SHOULDN'T blur your house on Google Maps - and warn doing so could actually encourage burglars to pay a visit
Urgent warning for homeowners: Why you should blur your house on Google Maps - and how to do it

Search This Website…

  • My New Book
  • My Other Books
  • Donate
  • About
  • Privacy
  • Emergency Food
  • Most Important

© The Most Important News 2025

As an Amazon Associate I earn from qualifying purchases.
7ads6x98y