The EU agreed new rules yesterday for bank bailouts or "bail-ins." The new system will take effect from 2016 but emergency resolutions can be brought forward in the event of banks failing in the interim period.
Bail-ins are likely to happen at banks that are close to failure in countries that have adopted the FSB bail-in conventions and or do not have financial resources to bail-out their banks. Thus, deposits in failing banks in G20 nations may be subject to bail-ins.
It has been obvious for some time that banks in many jurisdictions are insolvent and that they are simply too big for governments to rescue. It should come as no surprise that central bankers have been considering how to deal with this problem and that they have resolved a solution.
If global banks’ are realistically going to improve their balance sheet diversification and liquidity profiles, gold will have to be part of that process. It is ludicrous to expect banking to regain a sure footing through the increased ownership of government securities.
Maybe you didn't know that the rogue trader at UBS AG who lost $2.3 billion last year was trading exchange-traded funds (ETFs)... or that Jerome Kerviel, another rogue trader at Société Générale SA who lost $7.2 billion in 2008, was trading ETFs.
Gold and silver prices headed lower this morning while platinum and palladium extended their Tuesday rally with fairly hefty additional gains. Gold retreated towards the $1,750 area while silver fell back to near the $34 level as profit-takers moved in following yesterday’s Sino-Euro-news-induced euphoria.