Bank Bail-Ins Pose Risks To Retail Depositors

By: GoldCore

Bank bail-ins pose risks to retail investors and especially savers throughout the western world. The new bail-in rules have been made operational since the beginning of this year in the EU and in many other countries yet the risks and ramifications of bail ins have been largely ignored in most of the media.

The Financial Times covers bail-ins today with a focus on the risk to investors while continuing to ignore that posed to savers and depositors including small and medium size enterprises.

A banking union in the EU is wonderful in concept but in practice is fraught with difficulties and risk. The use of bail-ins and the confiscation of deposits while protecting some tax payers in the short term, will likely destroy consumer and business confidence in the already fragile Eurozone economies and severely impact on the tax take in EU economies in the aftermath of the bail-ins and ensuing recessions or depressions.

Small and medium size businesses are the back bone of European and global economies. The confiscation of their corporate deposits, the very capital they use to fund growth – including servicing debt, paying rent and mortgages, employing staff and paying wages – would be highly deflationary and would push economies over the edge and into sharp recessions and lead to contagion in the Eurozone.

Bank bail-ins remain one of the greatest, but most poorly analysed and understood threats to depositors and savers today. The law of unintended consequences …

Read Protecting your Savings In The Coming Bail-In Era (11 pages)
Read From Bail-Outs to Bail-Ins: Risks and Ramifications (51 pages)

This update can be found on the GoldCore blog here.

Mark O'Byrne

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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