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This slide deck is to provide detail on what a bail-in is, how likely bail-ins are, where bail-ins will take place and what steps depositors need to take to protect their deposits. On Slide 12 you can also download a copy of our Guide to Bail-Ins: Protecting Your Deposits in the Coming Bail-In Era.
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• What Are Bail-Ins?• How Likely Are Bail-Ins?• Where Will Bail-Ins Take Place?• How to Protect Your Deposits?• 9 Key Considerations• Download Your Bail-In Guide
Bail-Ins
1. What Is A Bail-In?
Definition 1A bail-in is when regulators or governments have statutory powers to restructure the liabilities of a distressed financial institution and impose losses on both bondholders and depositors.
1. What Is A Bail-In?
Definition 2A bank bail-in is an attempt to resolve and restructure a bank as a going concern, by creating additional bank capital (recapitalisation) via forced conversion of the bank’s creditors’ claims (potentially bonds and deposits) into newly created share capital (common shares of the bank).
1. What Is A Bail-In?
Definition 3 – In Plain EnglishIf your bank goes bust then your deposits/savings will be taken from you and turned into shares of the bank.You have no say in the matter because in legal terms, as a bank depositor, you are just an unsecured creditor of the bank.
2. How Likely Are Bail-Ins?
Believes the U.S. Federal Reserve, along with central banks, has stabilised the global financial system through low interest rates and quantitative easing, while the EU has managed to help recapitalise banks in the European Union, and avoid the breakup of the European Monetary Union (EMU).
Two Schools of Thought: School 1
Reality: Highly Unlikely
2. How Likely Are Bail-Ins?
Believes that many banks globally remain vulnerable to insolvency because they are being kept on life-support due to extremely accommodating central bank measures including near zero percent interest rates and quantitative easing.
Reality: Highly Likely
Two Schools of Thought: School 2
3. Where Are Bail-Ins Likely?
Bail-ins are likely to happen to banks that are close to failure in countries that have adopted bail-in conventions and or do not have financial resources or will to bail-out their banks.
The EU, UK, the U.S., Canada, Australia and New Zealand all have plans for bail-ins in the event of banks and other large financial institutions getting into difficulty.
4. How To Protect Your Deposits?
Depositors internationally should examine the financial health of their existing bank or banks.
Overall, diversification of deposits now has to be considered.
This means diversification across financial institutions and across countries or jurisdictions globally.
5. 9 Key Considerations
6. Download Your Bail-In Guide
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