Money grab from depositors for bail-outs is long-planned, and it's not just for Cyprus
(For updates on Cyprus see this post and this live blog). Recall that the Cyprus crisis began when Cypriots revolted against an EU-imposed bank bailout that would have reached into the accounts of ordinary depositors and grabbed ~6% of whatever was there -- over a long weekend! The EU, and subsequent media reporting, defined the money grab as a "one off," one-time thing, but in fact the policy has been in the works for some time. The redoubtable Ellen Brown:
The deal pushed by the “troika” -- the EU, ECB and IMF -- has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.
In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis. The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.
The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:
ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors...
The spectrum of “creditors” is defined to include depositors:
At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.
Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case.
Well, I'm certainly surprised. My bank certainly goes out of its way to create that impression.
Please, can't we have a Post Office bank where I can just, ya know, put my money without worrying it's going to be stolen?