Bail-ins - what are they and does the STS program protect me?


Many clients and prospects look to asset protection strategies in order to protect themselves against predicted "bail-ins" by governments. I have heard many different points of view and opinions as to what a bail-in actually is. The common misconception I hear is that somehow a rogue or bankrupt national government will go after citizen's assets and outright steal them from private bank accounts. Some advisors may even suggest that asset protection can protect against such a bail-in scheme because the action would only be against citizens and not trust or business accounts. This is flat out incorrect.

To clear up the confusion, let's first explain what is meant by the term "bail-in". As explained in this article by The Economist, a bail-out is when outside investors rescue a borrower by injecting money to help service a debt. Bail-outs of failing banks in Greece, Portugal and Iceland were primarily financed by taxpayers.

By contrast, a bail-in, a term first popularised in the pages of The Economist, forces the borrower's creditors to bear some of the burden by having part of the debt they are owed written off. (In the case of Cyprus, the creditors in question were bondholders, and depositors with more than €100,000 in their accounts.)

A “bail-in” process for bank resolution is a potentially powerful “third option” that confronts the problem of a failing bank head-on. It would give officials the authority to force banks to recapitalise from within, using private capital and not public money to recapitalize itself to remain liquid.

In other words, the bank uses depositor's money, YOUR money, to recapitalize itself rather than allowing itself to outright fail. In this scenario, the government would no longer offer public taxpayer money to bail out a failing bank. The risk is shifted to the banks and to their investors (which includes depositors) where it properly belongs. This forces banks to remain conservative, responsible, and not take unwarranted risks with your money if they hope to attract depositors to their banks.

In summary, in the event that a bank is nearing a failure point, it will bail-in, or take depositor's money in order to save itself from failure. In such an instance, this will most likely be done on a pro-rata basis from ALL accounts, whether personal, Trusts, or businesses. If the bank needs 20% of the total outstanding deposits from all account holders in order to survive, then your account would simply have 20% deducted from it as a capital bail-in contribution in order to save the bank that you are a partial investor in.

FACT: "Very few account holders understand that when they put money on deposit with a bank, it is actually recorded on the bank's balance sheet as an asset of the bank and a corresponding debt (liability) to the account holder (you)."

If the bank fails, the legislation now allows for the banks to bail-in its customers to save itself. No more public money will be used to bail-out careless banks.

Many argue that the deposit insurance funds in Canada and the US will be there to insure that all depositor's money wil be insured up to $100,000 CDN or $250,000 USD respectively, while the balance will be subject to bail-ins. The problem is, that the CDIC and FDIC funds are woefully insufficient and able to cover only a fraction of the deposits on account in both countries. If a 1929 financial depression were to happen again, you would be lucky to keep 2% of your capital under such a nation-wide banking system failure. Nevertheless,

The point is this: bail-ins are a serious potential threat to your wealth, for sure. The Wealth Coaches can assist you in properly structuring your investment portfolio to protect against the risk of failed paper asset investments. including bank failures.

However, the concept of asset protection is meant to protect you against legal assaults to your wealth that is duly registered in your legal name. Asset Protection by itself WILL NOT protect you against a bank bail-in, unless the banks decide to target only personal accounts, while leaving Trust and Business accounts untouched. I find this to be an unlikely outcome of a bank bail-in.

In my opinion, in today's uncertain legal, political, and financial world, everyone does need asset protection but not because of the threat of a bank bail-in.

For more information on bank bail-ins, watch these two videos.

Lawyer Rocco Galati describes Bail-ins

Published on 15 Mar 2016 in YouTube channel i-ACUSE.com

This clip was taken from the 45.3 min mark on COMER VS Bank of Canada Video, published on May 3, 2015. From the conference held in Montreal on April 26th. Footage from 99% Media. Edited to primary English excerpt.

In Canada there is a legal battle taking place, COMER vs the Bank of Canada. COMER is the Committee On Economic and Monetary Reform, http://www.comer.org/. The main talk is 72 minute with another hour of questions and answers. I asked the Library of Canada for information on who Canadians pay interest to and where did they get the money. They could not answer the question. The western world owes more than $145 trillion dollars and it doesn't seem like it is Africa or South America that had the money to lend. As human beings we double our production output regularly yet the middle class is shrinking and debt is increasing. Over 1 trillion dollars has been stolen from Canadians since 1974. Up until 1974, Canadians had the Bank of Canada which had the responsibility for creating money in Canada. Up until that point, Canada had created some of the most massive infrastructure projects on the planet benefiting the people without debt. After 1974, the Canadian government started borrowing money from a private international banking cartel, which never had the assets to back the debt. Ponzi scheme. This is the same recipe that was applied to all western nations and is the reason for the state of the world today. These private banking thieves spend their resources on creating wars to distract the people and transfer further wealth to themselves. If you wish to get a better understanding of what is at risk and get the view from a well versed and seasoned politician I suggest you go to the following post of a talk by the Hon. Paul T Hellyer. http://www.wikivsnwo.com/full-disclosure-hon-paul-t-hellyer/ In all, it's about 2 hrs of viewing of the most important subject of our time that will determine if our children live in a world of perpetual war and austerity or in prosperity and peace. The players are real, the heroes and villains are real, unlike the Hollywood crap that people spend hours viewing every week. Thank you to 99%media for the film clip. I have remove the french section but if interested the original post is here; http://www.99media.org/

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