Is your money safe in a bank? - Canadian TV, Computing and Home Theatre Forums
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post #1 of 11 (permalink) Old 2013-03-29, 12:13 PM Thread Starter
Join Date: Oct 2004
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Is your money safe in a bank?

Hopefully the financial well-being of banks is not considered politics.

If you have been watching / reading about Cyprus and their banking bail-in you're probably thinking no way it can happen here or in the US. Consider the following 2 articles I'm posting and ask yourself does Canada already have legislation in place (or soon to be in place) to do precisely to Canadians what the Troika did to Cyprus.

Canada's big 6 banks are too big to fail, regulator says

Canada's six largest banks have been designated as too big to be allowed to fail for the country by the federal regulator, meaning they will be subject to more stringent capital requirements and supervision.

The Office of the Superintendent of Financial Institutions said the designation stems from a framework issued by the Basel committee on banking oversight in October that set out guidelines for assessing domestic financial institutions.

Under the OSFI requirements, the Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank will be subject to an additional one per cent capital buffer for risk, meaning they will have to hold more assets in reserve to protect against a sudden run on deposits.

The banks will need to have a common equity tier 1 ratio of eight per cent as compared with seven per cent for smaller, less important financial institutions as of Jan. 1, 2016.
Recently the 2013 Canadian budget ( PDF page 145) was introduced and buried deep within is this info which shows that preparations are being made

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.Canadian budget states: “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.
As a depositor in a bank ask yourself if your deposits are an asset or liability to the bank and just how rapidly can they be converted by the bank. Think instantaneous, electronic.
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post #2 of 11 (permalink) Old 2013-03-29, 12:36 PM
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This is a very alarmist post.

Comparing our banking system with that of Cyprus is laughable.
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post #3 of 11 (permalink) Old 2013-03-29, 12:43 PM
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All deposits are a liability to a bank, as it's money they owe the depositors. A bank's assets are the money it has loaned out. Also, Cyprus, like some other countries, was bankrupt, relying on bailouts. IIRC, the problems in Cyprus were due to it's heavy investments in Greece, another bankrupt country.

I haven't lost my mind. It's around here...somewhere...
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post #4 of 11 (permalink) Old 2013-03-30, 09:00 AM
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Oh look, the sky's falling. Not if you don't look up it isn't.
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post #5 of 11 (permalink) Old 2013-03-30, 10:52 AM
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Fractional reserve banking itself is an unsustainable scam which won't end very well when we hit the limits to growth. (we're not far off at all) We'll all be doomed - sooner or later.

WARNING: The HVAC information I provide is not based on field experience and DOES NOT constitute professional advice.
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post #6 of 11 (permalink) Old 2013-03-30, 11:54 AM Thread Starter
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on of my favourite websites is ZeroHedge which has been following the Cyprus debacle from the beginning. Right now they have this - The Canadian Government Offers "Bail-In" Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out Banks

forewarned is forearmed

Last edited by gworg; 2013-03-30 at 11:55 AM. Reason: add link to ZeroHedge website
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post #7 of 11 (permalink) Old 2013-03-30, 03:53 PM Thread Starter
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Mervyn King, the governor of the Bank of England said this about fractional banking

“Eliminating fractional reserve banking explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy. If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not co-exist with risky assets.”
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post #8 of 11 (permalink) Old 2013-03-31, 03:59 PM
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We're safer in Canada but apparently US and UK citizens should be concerned:
It Can Happen Here: The Confiscation Scheme Planned for US and UK Depositors

Have the banks learned anything from the 2008 debacle? Apparently not:
. . . Bank of America’s holding company . . . held almost $75 trillion of derivatives at the end of June . . . .

That compares with JPMorgan’s deposit-taking entity, JPMorgan Chase Bank NA, which contained 99 percent of the New York-based firm’s $79 trillion of notional derivatives, the OCC data show.

$75 trillion and $79 trillion in derivatives! These two mega-banks alone hold more in notional derivatives each than the entire global GDP (at $70 trillion)
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post #9 of 11 (permalink) Old 2013-04-04, 11:54 AM Thread Starter
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Could you prove that you actually had a bank account with a particular bank? If you don't have paper records verifiably from the bank you could have a problem.

A friend of mine discovered that a small amount, $500, had disappeared from his account. Since he had the paper records he was able to follow the money trail. Interestingly the bank, upon discovering the discrepancy, simply altered all the electronic records to reflect that the $500 had never existed. His paper records reflected that the $500 did exist.

I raise this question given what has happened in the past several months. Several weeks ago my bank, TD, was hit by a DDOS attack giving me no access to any banking or brokerage services for a number of hours. I'm a paperless banking customer and there appears to be no way to actually get a chequing account statement electronically.

In this article, US Bank Website Attacks Reach New Highs, major U.S. bank websites were offline a total of 249 hours in the past six weeks.

Then there's this, Chase denies hack behind sudden account drains.

After discovering the apparently empty accounts via the Internet or mobile devices, many Chase banking customers turned to Twitter to express their frustration and show screen shots of zero balances. Other users were greeted with messages that their bank account balances were unavailable.
According to the articles there are serious cyber attacks emanating from who knows where.

If bank records and backups were destroyed in such an attack could you prove that you were a customer and could you prove that your bank records were real?

Sounds like the plot from many different movies but given that attacks are happening and that WW III will likely be a cyber war ask yourself, are you prepared? Science fiction? Read this on how North Korea through the detonation of a satellite deployed nuke, could destroy the US economy. I recently read that 9 out of 10 people in the US would be dead within a year of such an attack whereas the article estimates 2 in 3, small consolation.
The Congressional EMP Commission estimates that, given the nation’s current unpreparedness, within one year of an EMP attack, two-thirds of the U.S. population — 200 million Americans — would probably perish from starvation, disease and societal collapse.
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post #10 of 11 (permalink) Old 2013-04-06, 03:53 PM Thread Starter
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CBC version of what's happening

This article describes in simple terms what the planned bail-in included in the 2013 budget, page 145, probably means. risks and rewards

Neil Macdonald: Ottawa weighing plans for bank failures

What Ottawa intends to propose — the concept has been discussed for a few years now in the rarefied circles of monetary experts — is the creation of a new type of higher-risk bank bond known as "contingent capital."

The bondholder would enjoy a higher-than-normal return, maybe even a much higher-than-normal return.

But it would be understood that in the event of a threatened failure, the bond would be converted to shares, meaning potentially a total loss for the bondholder, and a source of capital for the bank.

Think of it as a kind of pre-approved loan for the bank itself.

Trust in government
In a speech, Mark Carney, Canada's departing central banker, has called publicly for just such a system.

At TD Canada Trust, Alexander says this kind of system would make the banks stronger.

But he also notes that many Canadians believe, mistakenly, that their RRSPs and other holdings are safe and insured, too, up to the $100,000 threshold.

They don't often realize that government bonds as well as stocks and mutual funds are among the investments that don't qualify for CDIC insurance.
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post #11 of 11 (permalink) Old 2013-04-09, 12:39 PM Thread Starter
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If you think this cannot happen in the US the FDIC has proposed legislation that would allow it to take control of a bank it deems systemically important and write down your savings accounts as part of the bail-in.
This power was granted in the 2010 Dodd-Frank bill
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