The big banks are putting the finishing touches on their plan to rip off their own depositors to cover their stupidity, instead of taxpayers. How nice.
Via Reuters: “G20 edging towards deal on ‘bail-in’ bond cushion for banks
Government leaders are expected to agree in November that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue, industry and G20 officials said.
The bonds, known as “gone concern loss absorption capacity” or GLAC, are seen by regulators as essential to stopping the world’s 29 biggest lenders from being “too big to fail”.
The plans are being drafted by the Financial Stability Board, the regulatory task force of the Group of 20 economies which declined to comment ahead of a G20 summit in November, when G20 leaders will discuss the reform before it is put out to public consultation.
The reform would put in place the final major piece of G20 regulation on banking as the global body turns to a “post-crisis” agenda of fostering economic growth and bedding down the rules it has approved.
Since the article is woefully short on details, let me make sure you understand. What this means is that, when your bank goes belly up, they will steal your deposits to cover the loss and give you a bond—partial ownership of an income stream from the bank. What happens in many cases is that the value of the bond plummets as the true extent of the bank’s failure is revealed. So you simply end up owning a worthless piece of paper instead of having money in your account.
Don’t get me wrong, this is definitely a better way to go than what we’ve been doing. But, whereas it should lead customers to beat up on bankers to make sure they’re not being idiots, I’m sure it will just be a further backstop for their obscene bonuses, so they can continue being stupid, and letting others pay for their losses.