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European Parliament Votes Big Quantitative Stealing (Bail-In Regime)
17 April 2014
(LPAC)—With a vote in the European Parliament two days ago, the final seal has been put to the bail-in legislation and the Bank Resolution Mechanism for the European Union. Now the legal text must be put into practice, and it will take almost 400 separate technical standards, says the Financial Times. The Big Quantitative Stealing is presented by the Goebbels-like propaganda of the EU as a pro-taxpayer revolution and as an electoral boost to the EU. "This is Europe’s equivalent of Super Tuesday," said Simon Lewis, CEO of the Association for Financial Markets in Europe. In the presentation of the bail-in measure (BRRD), the depositors were not mentioned at all, but only the bondholders and the shareholders, as those who should relieve the taxpayers of the cost of banking crashes. The taxpayers (suggestively enough, an entirely different category—ed.) will get very little protection from these limited sources and the minuscule new bank resolution fund of EU55 billion (fully established only in eight years). The brunt is still on the shoulder of the "taxpayers." Very tricky, the European Parliament combined the decision to open the door for the bank robbery of the depositors, with a small reform of the depositors guarantee system. In that way they instead could present the whole thing as better protection for the depositors. The final texts show that the bail-in system to steal the deposits from the real economy is still there in spite of the overplayed words inserted to protect the "deposits held by natural persons and micro-, small- and medium-sized enterprises" in Article 44:3. This proposition can be violated any time that deposit protection disrupts "the functioning of financial markets," not in case it directly disrupts the real economy. In the first version of the text, the derivatives were listed here, unlike the deposits and uncovered bonds, straight as excluded from bail-in. Now, better concealed further down is that this part of the text is connected to the derivatives and the main purpose of this paragraph, mentioning enterprises, is to insure the financial system from systemic failures. These are the relevant paragraphs about the bail-in system and how derivatives are protected: Section 5: The bail-in tool ... Article 44: Scope of bail-in tool, 2. Resolution authorities shall not exercise the write down or conversion powers in relation to the following liabilities whether they are governed by the law of a Member State or of a third country: (a) covered deposits; ... Point (a) of the first sub-paragraph shall not prevent resolution authorities, where appropriate, from exercising those powers in relation to any amount of a deposit that exceeds the coverage level provided for in Article 6 of Directive 2014/.../EU*. ... 3. In exceptional circumstances, where the bail-in tool is applied, the resolution authority may exclude or partially exclude certain liabilities from the application of the write-down or conversion powers where: ... c) the exclusion is strictly necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards eligible deposits held by natural persons and micro, small and medium sized enterprises, which would severely disrupt the functioning of financial markets, including of financial market infrastructures, in a manner that could cause a serious disturbance to the economy of a Member State or of the Union; (pages 286 - 294) Article 49: Derivatives, 1. Member States shall ensure that this Article is respected when resolution authorities apply the write-down and conversion powers to liabilities arising from derivatives. 2. Resolution authorities shall exercise the write-down and conversion powers in relation to a liability arising from a derivative only upon or after closing-out the derivatives. Upon entry into resolution, resolution authorities shall be empowered to terminate and close out any derivative contract for that purpose. Where a derivative liability has been excluded from the application of the bail-in tool under Article 44(3) [i.e., where cancelling a derivative jeopardizes the stability of the system, in other words always — ed.] resolution authorities shall not be obliged to terminate or close out the derivative contract. (page 334) |