We were among the first ones to warn about the Banking Recovery and Resolution Directive (BRRD), which allows a failing bank to use its clients’ accounts for a bail-in. Any time this was – rarely – mentioned in the media, either the banker or someone from a regulatory agency would say there was nothing to worry about, since accounts of less than 100 000 euro were not targeted by the directive. In fact, this is spelled out in the wording of the directive, but we had explained that this guarantee was purely an illusion and that accounts with less than 100 000 euro would be targeted as well. But we were preaching in the desert until now.
None other than the ECB has just confirmed what we’ve been saying all along, as revealed by Zero Hedge. In a very detailed “opinion” piece (69 pages) from November 8 in regard to crisis management, the ECB acknowledges, obviously, that in case of a crisis hitting one or several banks, depositors would quickly withdraw their money and keep it in cash or invest it somewhere else, which would only accentuate the crisis. The ECB simply wants to prevent this bank run by allowing banks to block deposits and authorise limited withdrawals, like they did in Cyprus in March, 2013. According to the institution, the deposit protection scheme is no longer necessary:
“Covered deposits and claims under investor compensation schemes should be replaced by limited discretionary exemptions to be granted by the competent authority in order to retain a degree of flexibility."
"...during a transitional period, depositors should have access to an appropriate amount of their covered deposits to cover the cost of living within five working days of a request."
After freezing life insurance in case of a crisis, as per the Sapin Law 2, we should expect the equivalent in the banking system. As of now, this is but a suggestion formulated in a research and analysis document, but it shouldn’t take long before it becomes law, there’s no doubt about it.
This just goes to show that for the next financial crisis, depositors will have both their hands and feet tied with their blocked accounts, and they will only be allowed a minimal sum to cover their basic needs. Meanwhile, the “competent authorities” (banks, governments and, of course, the ECB) will cook up a “sauce” with which to eat the depositors’ savings... and accounts under 100 000 euro will not be protected at all – they will contribute to the “shoring up” of the banking sector...
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Philippe Herlin Finance Researcher / Member of the Goldbroker Editorial Team
Philippe Herlin is a researcher in finance and a doctor in economics of the Conservatoire National des Arts et Métiers in Paris. A proponent of extreme-risk thinkers like Benoît Mandelbrot and Nassim Taleb, and of the Austrian School of Economics, he will be bringing his own views on the actual crisis, the Eurozone, the public debts and the banking system. Having written a book on gold that has become a reference (L’or, un placement d’avenir, Eyrolles 2012), he wishes to see gold play a growing role in our economies, all the way to its full re-monetization.