EU Agreed Banking Union Yesterday – Global Bail-Ins Cometh …

EU Agreed Banking Union Yesterday – Global Bail-Ins Cometh …

Euro gold rose to about €966, platinum gained $2.30 to $1432.00, and copper climbed slightly to about $2.95.
Gold had become overbought after its surge to 6 month highs and was due profit taking and a correction. A perception of an abatement of tensions between Russia and the West has contributed to the pullback this week. Momentum could lead to further falls next week but we expect weakness will be short lived.

It was very welcome to see a woman taking over the helm of the Federal Reserve. However, we cannot allow our goodwill in this regard to cloud judgement and impact our analysis of her and the Fed’s performance and policies.

Yellen gave mixed messages, both on the economy and on monetary policy, but market participants have chosen to focus on some of the more hawkish comments that she made. She acknowledged that the Fed may have been too optimistic about the economic outlook recently. Yet, she and the Fed largely stuck to their projections for how growth and inflation will unfold in the coming years.

EU Agrees Banking Union – Bail-Ins Cometh … 

In the early hours of yesterday morning European Union politicians struck a deal on legislation to create a single agency to handle failing banks and bail-ins in the Eurozone after another all night negotiating marathon ahead of a summit of EU leaders starting in Brussels today.

German Finance Minister Wolfgang Schaeuble was drawn into the talks around 0530 GMT as the negotiations dragged on into the night. The politicians emerged around 0715 GMT with the deal, which now will need formal approval by the European Parliament and by national governments.


Negotiators persuaded nations that had been opposed to the proposed Single Resolution Mechanism and the legislation for bail-ins to agree.


Insolvent banks will be treated equally regardless of the country they are based in. Failed banks creditors, both bond holders and depositors, will be subject to bail-ins in the same way in all countries.

“It’s a very good agreement,” European Central Bank President Mario Draghi said before the meeting of EU leaders in the Belgian capital. The banking union was shaped in part by Draghi and he hailed the compromise plan as “great progress for a better banking union. Two pillars are now in place.”


Plans for a single banking union were put together two years ago due to fears for the euro and the EU’s 6,000 banks. Countries wanted to break the link between sovereigns and insolvent banks to ensure taxpayers were not forced to bail out insolvent banks and to prevent contagion and a systemic crisis.

It had already been agreed that shareholders and importantly now depositors will be bailed in before the single resolution fund can be tapped. About 100 banks plus transnationals and those already bailed out will come under the direct supervision of the ECB from January.


While most of the coverage is on the European Union member states and the European Parliament agreeing the final details of a single resolution mechanism (SRM) to wind up failing banks, there is little coverage of the developing bail-in regimes and the heightened risk that depositors in the Eurozone now face.  


Banks in the Eurozone remain extremely vulnerable. Our research on
bail-ins and the developing bail-in regimes clearly shows how banks remain very vulnerable and it is now the case that in the event of bank failure, your deposits could be confiscated as happened in Cyprus.

It is important to realise that not just the EU but also the UK, the U.S., Canada, Australia, New Zealand and most G20 nations all have plans for bail-ins in the event that banks and other large financial institutions get into difficulty.

The coming bail-ins will pose real challenges and risks to investors and of course depositors – both household and corporate. Return of capital, rather than return on capital will assume greater importance.

Evaluating counterparty risk and only using the safest banks, investment providers and financial institutions will become essential in order to protect and grow wealth.

It is important that one owns physical coins and bars, legally in your name, outside the banking system. Paper or electronic forms of gold investment should be avoided as they along with cash deposits could be subject to bail-ins.

Educate yourself about this emerging threat to your livelihood by reading:
Bail-In Guide: Protecting your Savings In The Coming Bail-In Era (10 pages)

Bail-In Research: From Bail-Outs to Bail-Ins: Risks and Ramifications (50 pages)  

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