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

2016 Sign - Public Domain

By Michael Snyder – The Economic Collapse Blog

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…

Continue reading at The Economic Collapse Blog: January 1, 2016: The New Bank Bail-In System Goes Into Effect In Europe

About the author:

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.

Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream

Read his new book The Beginning of the End

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