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Perfidious Albail-in? Brits fiddle with bank crash
8 April 2014
(LPAC) — The Financial Times headline late Monday afternoon — "EU deal on bank failures risks unravelling" — indicated the new level of chaos and bank crash potential The FT wrote, "Britain is facing objections from several other member states as it scrambles to revise a political deal, reached in December [in Westminster—ed.], in an attempt to protect the Bank of England emergency role as covert lender of last resort.... Other diplomats suspect it is revisiting a fundamental element of the reforms, which aim to spare taxpayers from the costs of bank failure. `This is a complete mess, a nightmare and we have to decide what to do fast,’ said one person involved." And the paper added, "The British want to clarify that central banks can extend liquidity even when relying on a specific government guarantee, without triggering haircuts on bondholders." Immediately some countries — Denmark, the Czech Republic — insisted on a hard line for pure bail-in, while others — France, Italy, Sweden, Portugal — reacted by demanding they, too, be able to bail out banks without triggering bail-in. Even if these countries had the resources to do that, which they do not, formal votes have been taken in the European Parliament and the Eco-fin, or European Economics and Finance Ministers, against it. So the British, counting on the dumb giant Federal Reserve to help the Bank of England bailing out London’s banks and derivatives, are fiddling with a policy on which they will continue to insist for all other governments. It remains to be seen what German will do. Only on Saturday, Bundesbank governor Jens Weidmann gave a speech urging that the bail-in policy must be accepted uniformly and immediately. [Paul Gallagher] |