June 18, 2013
When the Cypriot government forced account holders to cover bank losses earlier this year most of the world assumed this was a one-off event, limited only to the people of Cyprus.
Though warnings urging depositors to get their money out of banks spread across the world, few have taken them seriously.
Perhaps now they’ll reconsider.
We’re all familiar with bail-outs, as in the government rescuing failed institutions, namely banks, by injecting them with tens of billions of dollars to prevent collapse.
But have you ever heard of a bail-in?
Cyprus was a test run. It worked.Japan’s Financial Services Agency will enact new rules that will forced failed bank losses on investors, if needed, via a mechanism known as a “bail-in,” according to The Nikkei. Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases, the report noted.
This is now the official policy of the country of Japan, and is a serious considerationthroughout the Eurozone and the United States.