Rule by Banks: Bail-in Provision in 2013 Canadian Budget

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“Jim Flaherty’s Cyprus-style bank rescue plan” by Thomas Walkom, Toronto Star, 4 April 2013:

The new rules would allow federal regulators to seize unspecified bank liabilities—including, perhaps, the savings of uninsured depositors—and use them to prop up a faltering institution.

Which, as it turns out, is exactly what Cyprus’ government did . . . ¹

The liabilities seized were uninsured bank accounts with over 100,000 Euros. ¹

Events in March-April, 2013, “Cyprus bail-out will cost British taxpayers £38.2m” by Macer Hall, Express, 5 April 2013:

IMF managing director Christine Lagarde said the rescue deal will help the Cypriot government restructure the island’s banks. Dismissing anger that accounts held in Cypriot banks are to be raided to help fund the deal, she said customers with deposits of less than £85,000 were safe. . . . The IMF [International Monetary Fund] ordered Cyprus to slash public-sector pension and welfare costs as part of the deal. . . . ²

“The Cyprus model for Canada’s big banks” by Brian Lilley, 30 March 2013:

I started asking . . . whether the confiscation of money from private bank accounts could happen in Canada the way it has happened in Cyprus. . . . Little did I know that the answer was already in the budget . . .³

Federal Budget: Canada’s Economic Action Plan 2013, Pages 144-145 ⁴

The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption . . . . This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely [!?] event that one becomes non-viable.

The Government intends to implement a comprehensive risk management framework for Canada’s systemically important banks. This framework will be consistent with reforms in other countries and key international standards, such as the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions ⁵, and will work alongside the existing Canadian regulatory capital regime. The risk management framework will include the following elements:

• . . . The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders (!?) on how best to implement a bail-in regime in Canada. . . .

The budget legislation Bill C-60 passed:

“An Act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures. Short Title: Economic Action Plan 2013 Act, No. 1 . . . Royal Assent (2013-06-26).” ⁶

Note: terminology like “bail-in” (meaning “theft”) is not in the bill as far as I can see, although the intention expressed in the official budget document is clear; it must have been translated into more formal language.

From the Financial Stability Board’s website:

The FSB is chaired by Mark Carney, Governor of the Bank of England [and former Governor of the Bank of Canada]. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements. ⁷

“The ‘monarchs of money’ and the war on savers” by Neil Macdonald, CBC News, 29 April 2013

[A] new ruling class [actually not new!] has risen in the richer nations. These men and women are unelected . . . They are the world’s central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert. . . . The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air . . . [based on fraud in other words]. ⁸

“Regulator calls six banks systemically important, will face stricter rules on capital” by Madhavi Acharya-Tom Yew, Toronto Star, 26 March 2013