Its really difficult to fathom the incredible stupidity of what the EU is doing.
Imagine you are a chinese investor wanting to open a factory in Southern Europe, You will at some juncture need a local bank to take large amounts of funding as you get up and running.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
If you put your money in a bust bank, you should expect to lose a good portion of your money. Are you really suggesting that all government backstop all bank deposits?
So they havent taken any cash or assets like you claimed?
Correct, i was wrongly conflating the EU and the eurobanks as a single entity as although they are acting in cahoots against the public they are still technically separate.
@tim - He's setting out one of the dividing lines for 2015. Ed Miliband will try to jump on to the same side of the line as Dave (in fact he has already, unsuccessfully, tried to do so).
As I have patiently pointed out many times, all that Dave needs to be able to say in 2015 is that immigration has fallen compared with the out-of-control Labour years, and that, without the LibDems dragging their feet, we'd have done even better. The rest is noise.
Will the EURO collapse ? What would trigger this ? Spain or Italy running into a similar situation to Cyprus ?
I think the euro-political class would rather go down in flames in their bunkers than ever admit they were wrong so i expect there's a lot more 1000 bomber raids to go yet.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
Er, I would have thought you would lose up to 100% of the investment. Companies arent usually covered by deposit guarantees, are they? But I think you miss the crucial cause of the loss - it's not the loan provided by the troika .. it was the insolvency of the bank. If you put your money in an insolvent bank then it is at risk.
To reiterate the point made earlier, the levels of personal and corporate indebtedness are much lower in the Eurozone than in the UK. If the Eurozone banking system is bust, then so is ours.
(And for people saying 'you can print your own money'. Default through getting paid back less is exactly the same as default through getting money back that doesn't buy as much stuff. This is the 'money illusion'.)
Its really difficult to fathom the incredible stupidity of what the EU is doing.
Imagine you are a chinese investor wanting to open a factory in Southern Europe, You will at some juncture need a local bank to take large amounts of funding as you get up and running.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
Still want to set up that factory?
Why would you put all your investment into a local bank in one go rather than manage it through your normal treasury process, transferring say one month's liabilities to the local bank each month? I assume (though I don't know the intricacies) that the majority of large purchases such as land or plant could be paid from an account with a non-local bank if necessary. You should be able to limit credit risk on local banks to 100% of a pretty small tranche of your investment.
Of course, the complete disintegration of the economy of the country you've invested in could create its own medium-term threats to your investment.
it was the insolvency of the bank. If you put your money in an insolvent bank then it is at risk.
One of the most damaging features of the way the Cyprus bailout has been handled is that they have blurred that principle by imposing a haircut on depositors in solvent banks.
it was the insolvency of the bank. If you put your money in an insolvent bank then it is at risk.
One of the most damaging features of the way the Cyprus bailout has been handled is that they have blurred that principle by imposing a haircut on depositors in solvent banks.
I completely agree.
That said: this has now (broadly) changed, in that the haircut is going to be c. 30-40% above €100,000 at Laiki and - I believe - a 'sympathy' 4% levy on deposits above €100,000 at other banks.
all that Dave needs to be able to say in 2015 is that immigration has fallen compared with the out-of-control Labour years
Immigration doesn't work like that. Whether you think the importance of immigration in the polls is due to actual problems or people being big fat nazis it's still the same.
If you have ten years of 1/2 million people and then in the 11th year it's 400,000 then you might think you've reduced "immigration" but you haven't.
"Immigration" after ten years of 1/2 million is 5 million. After the 11th year it's 5.4 million
because yearly immigration isn't like yearly rainfall. It doesn't just disappear into the ground. It's permanent.
Its really difficult to fathom the incredible stupidity of what the EU is doing.
Imagine you are a chinese investor wanting to open a factory in Southern Europe, You will at some juncture need a local bank to take large amounts of funding as you get up and running.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
If you put your money in a bust bank, you should expect to lose a good portion of your money. Are you really suggesting that all government backstop all bank deposits?
I still havent heard whether Cypriot pension funds (which were largely in cash unless they managed to move mega bucks out in recent times) are to be hit by the haircuts or exempt. It will be calamitous if they are hit. But will the maths work out if they are exempt?
@MrJones - Well, we are where we are. We can't (unfortunately) just erase 13 years of Labour misrule from the history books. All any government can do is gradually move things back towards sanity.
If voters don't think that's good enough, and thereby let Labour in again, well, I have no further suggestions to make. They'll have to live with the consequences.
@MrJones - Well, we are where we are. We can't (unfortunately) just erase 13 years of Labour misrule from the history books. All any government can do is gradually move things back towards sanity.
If voters don't think that's good enough, and thereby let Labour in again, well, I have no further suggestions to make. They'll have to live with the consequences.
Fair enough. Just making the point about how it's seen on the ground.
@sam - I think Lord Ashcroft is probably right. Certainly the numbers seem to add up, and he got the proportions from a quite large sample.
The only other possible explanation is that there was a massive churn: LD -> Stay At Home and an almost equivalent Stay At Home -> UKIP.
However, evidence from canvassers (including, for example, Nick Palmer here) supports the proposition that there were a lot of direct LD -> UKIP switchers. For that reason, I tend to accept Lord Ashcroft's analysis.
@MrJones - Well, we are where we are. We can't (unfortunately) just erase 13 years of Labour misrule from the history books. All any government can do is gradually move things back towards sanity..
You think this Tory inspired all round clusterf--- is "moving back to sanity"?!!
What is interesting is that when a deposit bank fails either bailing it (Taxpayers taking the hit) or not bailing it out(Depositors taking the hit) is unpalatable either way. Of course if a bank falls or has a run on it then it will simply not have enough cash in the vaults to cover depositors at which point either depositors or taxpayers will have to take a hit. Banks obviously make lots of money and increase total debt through the fractional reserve system when times are good this is all fine and dandy, but when the $hit hits the fan the money people thought they had is simply not there. Now the banks rely on people all not wanting to withdraw their cash at once which is fine normally psychologically but of course there is the underlying truth that the money we all have on deposit to the banks is simply NOT there..
Of course an end to fractional reserve banking would trigger massive deflation and all sorts of problems on its own so isn't an option (Certainly not politically in Europe at any rate). Whats the answer ? I don't really know but its interesting to look at a system that if it breaks doesn't just take the house with it, but the whole street and then some.
The Tory whinging about Boris's car-crash interview is laughable. The Tories were merciless about Chris Huhne's lying and how it showed he was unsuitable for high office, so Boris's lying is absolutely fair game. What's even more funny is that most of those howling about the interview this morning are the very same that spent last week howling about "freedom of speech" and how important it was that the media holding politicians to account. So weak...
If you put your money in a bust bank, you should expect to lose a good portion of your money.
Sorry, but that sentence does not work. Think about it.
No-one would put money in a duff bank - Gormless and Badger excluded - if they knew the bank was bust. If the impression was given that the bank was stable - by the likes of, say, Goldman Sachs, PWC or the ECB - then why are the depositors liable?
I know that the ideal market - where information is freely tradable - is an economists dream but culpability has to be addressed. Given how embedded many 'consultancies' are within political parties, organisations and supra-nationalist soggy-soufflés, one wonders if it's time for a liberatarian revolt against the inbreed fools that 'think' they deserve to run our lives.
@BenM - Since Labour Shadow Ministers, all the way up to your much-admired leader, have fallen over themselves to admit that Labour screwed up extremely badly on immigration, yes, Cameron's approach is indeed a welcome move back towards sanity.
What Disselbloem effectively just said is this: If you have more than E100k in a Eurozone bank then we will definitely go for that before calling on the ESM / EFSF if the bank is dodgy - because weak banks need to solve their capital adequacy issues. This is the template.
Or put another way: Any account balance over E100k in a PIIGS bank or otherwise dodgy Eurozone bank is asking to be confiscated.
Or yet another way: Please can we have a series of bank runs PDQ.
Its really difficult to fathom the incredible stupidity of what the EU is doing.
Imagine you are a chinese investor wanting to open a factory in Southern Europe, You will at some juncture need a local bank to take large amounts of funding as you get up and running.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
If you put your money in a bust bank, you should expect to lose a good portion of your money. Are you really suggesting that all government backstop all bank deposits?
Well ours did... See RBS, Northern Rock & HBOS
That's because we have our own currency and central bank, which can print as much money as needed to guarantee deposits in failed banks. Whether this is ultimately a better policy than allowing banks to go bust (effectively what is happening in Cyprus) is a moot point. It's certainly less drastic in the short term but it may not be better long-term - Iceland's banks did go bust - it had a deep recession for a couple of years, huge amounts of bad debt were written off, but now it is growing rapidly. UK banks, on the other hand, still have huge amounts of bad debt on the books, the economy is stalled and both the government and the bank of England are desperately trying to inflate them away, with not much sign of success so far.
What is interesting is that when a deposit bank fails either bailing it or not bailing it out is unpalattable either way. Of course if a bank falls or has a run on it then it will simply not have enough cash in the vaults to cover depositors at which point either depositors or taxpayers will have to take a hit. Banks obviously make lots of money and increase total debt through the fractional reserve system when times are good this is all fine and dandy, but when the $hit hits the fan the money people thought they had is simply not there. Now the banks rely on people all not wanting to withdraw their cash at once which is fine normally psychologically but of course there is the underlying truth that the money we all have on deposit to the banks is simply NOT there..
Of course an end to fractional reserve banking would trigger massive deflation and all sorts of problems on its own so isn't an option. Whats the answer ? I don't really know but its interesting to look at a system that if it breaks doesn't just take the house with it, but the whole street and then some.
I think the problem is there's a natural tendency for banks to want to expand credit because that's how they make money. If you believe "real" growth only really comes from innovation i.e. getting more out of less then you need a mechanism that automatically adjusts the capital ratios based on the rate of innovation over the previous few years.
So, if you had a metric for that then every year you calculate a rolling average over the previous 5 years or so and that value is used to set the capital ratio - so the default ratio might be 2 or whatever thereby greatly restricting the chance of asset bubbles forming then someone comes along and invents computers and the innovation / productivity metric shoots up the the capital ratio goes up with it. As it flat-lines and drops then the capital ratio drops with it.
Its really difficult to fathom the incredible stupidity of what the EU is doing.
Imagine you are a chinese investor wanting to open a factory in Southern Europe, You will at some juncture need a local bank to take large amounts of funding as you get up and running.
Under the Eu's new system you run the risk of losing 40% of your investment, arbitrarily and with no recourse to law, if the troika suddenly decides to bail in that country whilst the bank is carrying your money.
If you put your money in a bust bank, you should expect to lose a good portion of your money. Are you really suggesting that all government backstop all bank deposits?
Well ours did... See RBS, Northern Rock & HBOS
That's because we have our own currency and central bank, which can print as much money as needed to guarantee deposits in failed banks. Whether this is ultimately a better policy than allowing banks to go bust (effectively what is happening in Cyprus) is a moot point. It's certainly less drastic in the short term but it may not be better long-term - Iceland's banks did go bust - it had a deep recession for a couple of years, huge amounts of bad debt were written off, but now it is growing rapidly. UK banks, on the other hand, still have huge amounts of bad debt on the books, the economy is stalled and both the government and the bank of England are desperately trying to inflate them away, with not much sign of success so far.
Delayed death by a thousand cuts was deemed better than a beheading...
I think there are two forms of banking bankruptcy:
1. When liabilities exceed assets, due to a recognition that certain assets (i.e. loans) are not going to be repaid.
2. When a bank is unable to meet its obligations because of the nature of banking - i.e. depositors rush for the door, but loans cannot simply been called in. This is known as 'duration risk' - banks lend long and borrow short.
In the latter case, I believe it is the duty of the Central Bank to offer full support.
In the former case, there should be a clear order of repayment precedence, with equity holders wiped out first, then preference-share holders, then holders of CoCos, then junior bond holders, then (pari passu) senior bond holders and depositors, and finally secured debt holders (mostly repos).
It's worth noting that pretty much all banks in the developed world are significantly better capitalised than they were four years ago. Core tier one capital (which includes equity and preference shares, and a portion of CoCos) levels are about 10% of assets in most banks. In 2007, before the crisis, the most levered banks had capital equivilent to only 3-4% of capital. So, banks can now absorb 3-4x the losses they could in 2007 without going bust.
Similarly, particularly in the UK and Ireland (although Spain is improving too), troubled assets have already been recognised and written down. So, all-in-all, banks should be significantly less risky than they were in 2007. Of course, in 2007 banks sold for 1.5-2.5x tangible book, and now (despite better capitalisation, having already written off most of their bad loans, and reduced competition in most markets), they trade on 0.4-1.2x book.
Any account balance over E100k in a PIIGS bank or otherwise dodgy Eurozone bank is asking to be confiscated.
Exactly. and so nobody in their right mind would have one. Major banks in Italy and Spain may have to stop trading soon due to cash calls. And if THESE banks are weak, then France's banks that have lent to them are - by extension weak- and so we can take their deposits!
This could turn into a cash confiscation that Lenin and Stalin could only dream about.....
I don't agree. I think if you split the argument into a couple of phases this is more clear.
Depositors vis-a-vis the bank. A depositor in a bank is a creditor; having £1000 in a bank, although most people would term that "their money", is really an IOU. If you are a creditor, you would normally lose out if the bank went under, and there's no difference in legal position between a small depositor, a large depositor, or someone who had lent the bank money as a loan (e.g. the government).
Goldman Sachs, PWC or the ECB. Goldman Sachs, PWC or the ECB are third parties as regards you and the bank. Since if depositors are excluded, other creditors lose out, this is important. Why should they lose compared to the depositor because of the actions of a third party? Instead, if "Goldman Sachs, PWC or the ECB" are the problem, then they should be liable to the depositor directly. This relationship has seen considered several times by the courts, and it is considered inappropriate to award damages in such a case. (Hedley Byrne v Heller). Alternatively, the government could step in to fine or regulate PWC-type ratings, but that wouldn't compensate our depositor.
If you put your money in a bust bank, you should expect to lose a good portion of your money.
Sorry, but that sentence does not work. Think about it.
No-one would put money in a duff bank - Gormless and Badger excluded - if they knew the bank was bust. If the impression was given that the bank was stable - by the likes of, say, Goldman Sachs, PWC or the ECB - then why are the depositors liable?
I know that the ideal market - where information is freely tradable - is an economists dream but culpability has to be addressed. Given how embedded many 'consultancies' are within political parties, organisations and supra-nationalist soggy-soufflés, one wonders if it's time for a liberatarian revolt against the inbreed fools that 'think' they deserve to run our lives.
:1848-anyone:
Come on Fluffy: Laiki was offering you 5% on deposits. That's like Icesave in the UK. Wouldn't you be suspicious of a bank that offers too high interest rates?
I went to get vaccinations for a trip to a tropical location two weeks ago. One of these vaccinations was for typhoid. I visited three pharmacies with the prescription, none of which had it, and it was the third pharmacist told me there's no typhoid vaccination left in the country and the doctor was an idiot for giving it to me. I went back to the surgery explaining this, and they apologised and said they'd get me a prescription for anti-typhoid tablets instead. At this time, I had my other vaccinations done, and the nurse explained to me how to take the tablets, because you have to do them at a set time, and gave me a leaflet to this effect.
This, of course, takes two days for them to do. I explained I would be on a business trip in two days time and couldn't they expedite it. They informed me they are a busy surgery and could not. I said fine, and that I would be back in two weeks, by which time I'd need to take the pills in two days.
I just went in today, and no one's done the prescription and they have no record of it. The last information they had was the note about my visit to the nurse on the system, which mentioned, among other things, that she had explained how to take the tablets. They said they'll make a note for the doctor to do the prescription again though. It will take two days.
An hour after this, they called me back and explained they found a note from the doctor saying he hadn't done the prescription because I needed to come in for an appointment on how to take the pills. They don't have any appointments for today, but I could try phoning on the day tomorrow to get one. Aside from the fact I need to work from the office tomorrow, last time I tried to get through on the day I phone every 30 seconds for about 20 minutes before I got through, at which point all the bookings were taken. I explained my frustration and, after a lot of pushing, got them to agree to give the doctor to call me.
I'm now looking into changing my GP surgery. This one gets 3.5 stars out of 5 on the NHS site. The other nearby ones are 3 stars, 2.5 stars, 2.5 stars and unrated. Any suggestions?
The Vanilla container dumped - stop smirking - this into yesterday's thread. I don't think the software is as fool-proof [sic] as it should be. Anyhoos,
Eurozone crisis explained (part 1):
Given that the assets of France's banks amount to over 400% of the nation's GDP, this is definitely in the realm of the possible. We have already noted in the past that the sequestration of ever more bank assets with the ECB already amounts to a kind of 'stealth nationalization' of the banks, as the pool of bank assets that private creditors of banks can lay claim to in the case of insolvency is shrinking ever more.
Google will add to more links. For those sans memory, 'The Economist' has been complaining about French and German Eurozone liabilities since 2008. Yet the ECB and Eurozone have ignored calls to restucture: It's not rocket-science!
If Cyprus falls there will be an effect in the Balkans and Central Europe. How secure would you feel today if you were an Austrian banker...?
This could turn into a cash confiscation that Lenin and Stalin could only dream about.....
Just to remind me ... who exactly would be doing the confiscating again?
Nobody is confiscating anything - these institutions have gone bankrupt, the money has been lent to people and organisations who are unable to repay. It is bad business decisions that have led to this situation - far from confiscating anything governments are actually protecting smaller depositors up to 100,000 euros - from the consequences of the failure of their banks.
For those who think Iceland got it right, let's not forget that it's GDP fell from $20.5bn at its peak to $12bn in about three years. It's recovered to $14bn now. But a 40% cut in GDP is not a pleasant experience, and makes Greece look like a holiday.
If insolvent banks are permitted by governments, regulators, auditors and supranational prudential authorities to continue trading then is it not reasonable for uninformed depositors to assume their money is safe?
Presumably the ECB's decision to provide Laiki with 9 billion Euros of liquidity finance was done on the basis that it was an ongoing business.
Maybe now is the time to qualify as a Cyriot lawyer.
Ashcroft is about as reliable a source as you are likely to get.
Anecdotal evidence reported here by a number of PBers active in Eastleigh during the by-Election strongly supported the view that UKIP were taking votes fairly evenly across the board from other Parties.
who exactly would be doing the confiscating again?
Well you can dress it any way you like but look at it the other way around. You have a quarter of a million euros in a bank in a civilised western country with regulators coming out of its ears overseen by even more regulators and a powerful central bank.
You are suddenly told that, owing to a bank failure that is none of your fault, you will lose 40% of everything over 100,000 euros. No recourse to law. No arbitration. You're probably an effing drug dealer anyway. In a mature western democracy.
Any account balance over E100k in a PIIGS bank or otherwise dodgy Eurozone bank is asking to be confiscated.
Exactly. and so nobody in their right mind would have one. Major banks in Italy and Spain may have to stop trading soon due to cash calls. And if THESE banks are weak, then France's banks that have lent to them are - by extension weak- and so we can take their deposits!
This could turn into a cash confiscation that Lenin and Stalin could only dream about.....
So where can we put our money, if not in a bank? Bricks and Mortar?
Come on Fluffy: Laiki was offering you 5% on deposits. That's like Icesave in the UK. Wouldn't you be suspicious of a bank that offers too high interest rates?
I would. Just as I would was when a bookie offered odds - year-or-so-ago - of 150-1 that Cammers would be the next out of the Cabinet (despite the presence of the Huhne).
If insolvent banks are permitted by governments, regulators, auditors and supranational prudential authorities to continue trading then is it not reasonable for uninformed depositors to assume their money is safe?
Good luck to any depositors looking to take such actions. It's probably a bit silly going after Government institutions as the Government is on the hook for billions of these same deposits anyway. And I doubt the auditors (if culpable) have billions down the back of the sofa (they certainly wont in the banks).
@rcs1000 Could you post a bitcoin address on the site for donations? I have a PayPal allergy.
PS. I hope PayPal are OK with that donate button? I've heard of a couple of cases with non-non-profits where they suddenly froze accounts or made people return donations. Apparently their definition of a good cause is a bit eccentric, eg sick cats are OK, sick kids are out.
Comments
If you put your money in a bust bank, you should expect to lose a good portion of your money. Are you really suggesting that all government backstop all bank deposits?
As I have patiently pointed out many times, all that Dave needs to be able to say in 2015 is that immigration has fallen compared with the out-of-control Labour years, and that, without the LibDems dragging their feet, we'd have done even better. The rest is noise.
To reiterate the point made earlier, the levels of personal and corporate indebtedness are much lower in the Eurozone than in the UK. If the Eurozone banking system is bust, then so is ours.
(And for people saying 'you can print your own money'. Default through getting paid back less is exactly the same as default through getting money back that doesn't buy as much stuff. This is the 'money illusion'.)
Of course, the complete disintegration of the economy of the country you've invested in could create its own medium-term threats to your investment.
Absolutely right: the bank was insolvent. If the Eurozone had done nothing at all, the result would have been much worse for depositors.
That said: this has now (broadly) changed, in that the haircut is going to be c. 30-40% above €100,000 at Laiki and - I believe - a 'sympathy' 4% levy on deposits above €100,000 at other banks.
If you have ten years of 1/2 million people and then in the 11th year it's 400,000 then you might think you've reduced "immigration" but you haven't.
"Immigration" after ten years of 1/2 million is 5 million.
After the 11th year it's 5.4 million
because yearly immigration isn't like yearly rainfall. It doesn't just disappear into the ground. It's permanent.
If voters don't think that's good enough, and thereby let Labour in again, well, I have no further suggestions to make. They'll have to live with the consequences.
He says it 22% Tory 2010 vote (4642) + 19% LD2010 vote (4743) = 9385.
The UKIP vote increased by 9638 so it works in that regard, and the other 12000 Con and LD 2010 votes would explain the 12034 lower turnout
But is he working backwards/justifying a 'protest vote' meme?
Im trying to work this out for betting not for tribal purposes
The only other possible explanation is that there was a massive churn: LD -> Stay At Home and an almost equivalent Stay At Home -> UKIP.
However, evidence from canvassers (including, for example, Nick Palmer here) supports the proposition that there were a lot of direct LD -> UKIP switchers. For that reason, I tend to accept Lord Ashcroft's analysis.
Banks obviously make lots of money and increase total debt through the fractional reserve system when times are good this is all fine and dandy, but when the $hit hits the fan the money people thought they had is simply not there. Now the banks rely on people all not wanting to withdraw their cash at once which is fine normally psychologically but of course there is the underlying truth that the money we all have on deposit to the banks is simply NOT there..
Of course an end to fractional reserve banking would trigger massive deflation and all sorts of problems on its own so isn't an option (Certainly not politically in Europe at any rate). Whats the answer ? I don't really know but its interesting to look at a system that if it breaks doesn't just take the house with it, but the whole street and then some.
No-one would put money in a duff bank - Gormless and Badger excluded - if they knew the bank was bust. If the impression was given that the bank was stable - by the likes of, say, Goldman Sachs, PWC or the ECB - then why are the depositors liable?
I know that the ideal market - where information is freely tradable - is an economists dream but culpability has to be addressed. Given how embedded many 'consultancies' are within political parties, organisations and supra-nationalist soggy-soufflés, one wonders if it's time for a liberatarian revolt against the inbreed fools that 'think' they deserve to run our lives.
:1848-anyone:
http://www.leftfootforward.org/2013/03/what-have-immigrants-ever-done-for-us/
Or put another way: Any account balance over E100k in a PIIGS bank or otherwise dodgy Eurozone bank is asking to be confiscated.
Or yet another way: Please can we have a series of bank runs PDQ.
Thank you
So, if you had a metric for that then every year you calculate a rolling average over the previous 5 years or so and that value is used to set the capital ratio - so the default ratio might be 2 or whatever thereby greatly restricting the chance of asset bubbles forming then someone comes along and invents computers and the innovation / productivity metric shoots up the the capital ratio goes up with it. As it flat-lines and drops then the capital ratio drops with it.
I think there are two forms of banking bankruptcy:
1. When liabilities exceed assets, due to a recognition that certain assets (i.e. loans) are not going to be repaid.
2. When a bank is unable to meet its obligations because of the nature of banking - i.e. depositors rush for the door, but loans cannot simply been called in. This is known as 'duration risk' - banks lend long and borrow short.
In the latter case, I believe it is the duty of the Central Bank to offer full support.
In the former case, there should be a clear order of repayment precedence, with equity holders wiped out first, then preference-share holders, then holders of CoCos, then junior bond holders, then (pari passu) senior bond holders and depositors, and finally secured debt holders (mostly repos).
It's worth noting that pretty much all banks in the developed world are significantly better capitalised than they were four years ago. Core tier one capital (which includes equity and preference shares, and a portion of CoCos) levels are about 10% of assets in most banks. In 2007, before the crisis, the most levered banks had capital equivilent to only 3-4% of capital. So, banks can now absorb 3-4x the losses they could in 2007 without going bust.
Similarly, particularly in the UK and Ireland (although Spain is improving too), troubled assets have already been recognised and written down. So, all-in-all, banks should be significantly less risky than they were in 2007. Of course, in 2007 banks sold for 1.5-2.5x tangible book, and now (despite better capitalisation, having already written off most of their bad loans, and reduced competition in most markets), they trade on 0.4-1.2x book.
Any account balance over E100k in a PIIGS bank or otherwise dodgy Eurozone bank is asking to be confiscated.
Exactly. and so nobody in their right mind would have one. Major banks in Italy and Spain may have to stop trading soon due to cash calls. And if THESE banks are weak, then France's banks that have lent to them are - by extension weak- and so we can take their deposits!
This could turn into a cash confiscation that Lenin and Stalin could only dream about.....
I don't agree. I think if you split the argument into a couple of phases this is more clear.
Depositors vis-a-vis the bank. A depositor in a bank is a creditor; having £1000 in a bank, although most people would term that "their money", is really an IOU. If you are a creditor, you would normally lose out if the bank went under, and there's no difference in legal position between a small depositor, a large depositor, or someone who had lent the bank money as a loan (e.g. the government).
Goldman Sachs, PWC or the ECB. Goldman Sachs, PWC or the ECB are third parties as regards you and the bank. Since if depositors are excluded, other creditors lose out, this is important. Why should they lose compared to the depositor because of the actions of a third party? Instead, if "Goldman Sachs, PWC or the ECB" are the problem, then they should be liable to the depositor directly. This relationship has seen considered several times by the courts, and it is considered inappropriate to award damages in such a case. (Hedley Byrne v Heller). Alternatively, the government could step in to fine or regulate PWC-type ratings, but that wouldn't compensate our depositor.
This, of course, takes two days for them to do. I explained I would be on a business trip in two days time and couldn't they expedite it. They informed me they are a busy surgery and could not. I said fine, and that I would be back in two weeks, by which time I'd need to take the pills in two days.
I just went in today, and no one's done the prescription and they have no record of it. The last information they had was the note about my visit to the nurse on the system, which mentioned, among other things, that she had explained how to take the tablets. They said they'll make a note for the doctor to do the prescription again though. It will take two days.
An hour after this, they called me back and explained they found a note from the doctor saying he hadn't done the prescription because I needed to come in for an appointment on how to take the pills. They don't have any appointments for today, but I could try phoning on the day tomorrow to get one. Aside from the fact I need to work from the office tomorrow, last time I tried to get through on the day I phone every 30 seconds for about 20 minutes before I got through, at which point all the bookings were taken. I explained my frustration and, after a lot of pushing, got them to agree to give the doctor to call me.
I'm now looking into changing my GP surgery. This one gets 3.5 stars out of 5 on the NHS site. The other nearby ones are 3 stars, 2.5 stars, 2.5 stars and unrated. Any suggestions?
The Vanilla container dumped - stop smirking - this into yesterday's thread. I don't think the software is as fool-proof [sic] as it should be. Anyhoos,
Eurozone crisis explained (part 1): [Src.: http://www.acting-man.com/?p=16676 ]
Google will add to more links. For those sans memory, 'The Economist' has been complaining about French and German Eurozone liabilities since 2008. Yet the ECB and Eurozone have ignored calls to restucture: It's not rocket-science!
If Cyprus falls there will be an effect in the Balkans and Central Europe. How secure would you feel today if you were an Austrian banker...?
I think Fluffy made a good point.
If insolvent banks are permitted by governments, regulators, auditors and supranational prudential authorities to continue trading then is it not reasonable for uninformed depositors to assume their money is safe?
Presumably the ECB's decision to provide Laiki with 9 billion Euros of liquidity finance was done on the basis that it was an ongoing business.
Maybe now is the time to qualify as a Cyriot lawyer.
Ashcroft is about as reliable a source as you are likely to get.
Anecdotal evidence reported here by a number of PBers active in Eastleigh during the by-Election strongly supported the view that UKIP were taking votes fairly evenly across the board from other Parties.
Well you can dress it any way you like but look at it the other way around. You have a quarter of a million euros in a bank in a civilised western country with regulators coming out of its ears overseen by even more regulators and a powerful central bank.
You are suddenly told that, owing to a bank failure that is none of your fault, you will lose 40% of everything over 100,000 euros. No recourse to law. No arbitration. You're probably an effing drug dealer anyway. In a mature western democracy.
Would you feel your money had been confiscated?
Please clarify your point....
PS. I hope PayPal are OK with that donate button? I've heard of a couple of cases with non-non-profits where they suddenly froze accounts or made people return donations. Apparently their definition of a good cause is a bit eccentric, eg sick cats are OK, sick kids are out.