Depositors Beware - Bank Deposits Of Over €100,000 Are At Risk

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Silver and gold bars
Silver and gold bars

Today’s AM fix was USD 1,463.00, EUR 1,118.67 and GBP 941.74 per ounce.   Friday’s AM fix was USD 1,476.50, EUR 1,124.95 and GBP 949.34 per ounce.

 

Cross Currency Table – (Bloomberg)

Gold rose $0.70 or 0.05% yesterday to $1,469.90/oz and silver finished down 0.37%. 

A bank holiday was observed in the U.K. and Ireland yesterday.

Ireland’s Finance Minister and current European Council President, Michael Noonan, is introducing a proposal to European finance ministers that would hit depositors who hold more than  €100,000 in the event of future bank collapses.

The Irish know a bit about bank wind-downs, and maybe they've realized that sticking it all on the taxpayer -- severe austerity -- doesn’t leave citizens with many euros left to consume and jump-start the economy.

Noonan will propose at Tuesday’s meeting in Brussels that large depositors (more than €100,000) are “bailed in” as part of future bank wind-downs.

According the the Irish Times, “Under a compromise text proposed by the Irish presidency, uninsured deposits of over €100,000 would be 'bailed in' in the event that a bank is dissolved, but depositors would rank higher than other creditors in the event of a wind-down.”

In this scenario, there would be “deposit preference,” where creditors would assume losses first and bank depositors would be accountable at the end of the process.

Not all European countries agree, and some of them believe that uninsured depositors -- those with under €100,000 -- would incur losses even though they should be protected by the federal deposit guarantee insurance.

XAU/USD, 1 Year – (Bloomberg)

There is currently no euro zone bank resolution process in place, and after the Cyprus disaster, EU lawmakers want transparency for the future.

The European Commission proposes that by changing from “bailouts” to “bail-ins,” the losses incurred would not be worse than the losses that shareholders and creditors would suffer in regular insolvency proceedings that apply to other private companies, the Irish Times noted.

European Central Bank president Mario Draghi and EU Economics Affairs Commissioner Olli Rehn are to introduce a working plan by 2015. The Irish presidency of the European Council is hoping to reach a consensus among council members by the end of next month.

XAU/EUR, 1 Year – (Bloomberg)

The poor results from Danske Bank in Ireland show that bad news is not just from domestic but also foreign-owned banks operating here.

Irish Finance Minister Noonan knows that the Irish government will need another €30 billion above the €64 billion that Irish taxpayers have already shelled out to bail out the banks.

It seems even the number crunchers at U.S. investment powerhouse BlackRock, which conducted stress tests on Irish banks in March 2011, have fallen short of what is needed to bail out the Irish banks. AIB, BOI, Permanent TSB and ESB initially needed €24 billion plus the money poured into Anglo and Irish Nationwide; then it ballooned to €64 billion.

XAU/GBP, 1 Year – (Bloomberg)

The Irish Independent stated that this gigantic sum, the equivalent of almost half of our economic output as measured by GNP, will not be enough.

In these uncertain times, while our politicians are hopefully looking out for us honest taxpaying citizens -- even as our services are being cut with every budget -- we recommend 5 percent to 10 percent in physical “safe haven" gold to protect against systemic risk. 

NEWS

Gold Declines as Rebound Hurts Physical Demand; Silver Tumbles - Bloomberg

Gold settles higher on strength in physical demand - MarketWatch

Gold Advances on Prospects China Will Expand Economic Stimulus - Bloomberg

Bank Deposits Of Over €100,000 Are At Risk – The Irish Times

Depositors Beware! Banks Need Another €30 Billion  ... At Least – The Irish Independent

Budget May Allow Banks to Confiscate Customer's Deposits – The Canadian Times

COMMENTARY

“The Bull Market is Very Much Intact” for Gold - Yahoo

Where We Are, Why Gold Was Bombed, And Why TA Is A Waste Of Time – JS Mineset

Small traders are net short gold for first time as big traders cover – Got Gold Report

What Is A Gold Standard? – Zero Hedge

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