This page has been archived and commenting is disabled.
Bondholders “Bailed In” In Austria - EU Bondholders Today, U.S. Depositors Tomorrow?
Bondholders “Bailed In” In Austria - EU Bondholders Today, U.S. Depositors Tomorrow?
- Auditors find €7.6 billion hole in Austria's "bad bank", Heta Asset Resolution AG
- Austria's government says it will not give Heta "a single euro"
- Emergency legislation passed last month means bondholders to be bailed in
- Risk of contagion high as other banks may hold Heta bonds
- “Bail-in is now the rule” - EU Finance Minister Noonan
- Austrian bondholders today … international depositors tomorrow ...
There are signs that the debt-induced banking crisis which rocked the global economy in 2008 - only to be postponed with vast infusions of new unpayable debt courtesy of the taxpayer - may be set to resume.
Bondholders are feeling the painful impact of the EU’s new bank resolution regime and bank bail-ins for the first time after the Austrian government said it would pour no more money into its ‘bad bank’, triggering a fall of nearly 30 per cent in the value of some bonds.
Austria's Financial Market Authority (FMA) has discovered a €7.6 billion capital shortfall on the balance sheet of Heta Asset Resolution AG, the "bad bank" that was formed from the remnants of failed lender Hypo Alpe Adria.
The Austrian government - who have heretofore plied Heta with €5.5 billion - held an emergency meeting to discuss the development. They concluded that they would not hand over "a single euro" to the bad bank.
Instead they have opted to use new legislation based on the EU's Bank Recovery and Resolution Directive (BRRD). The legislation was, coincidentally, enacted in Austria last month despite the fact that other European countries are not due to ratify the directive until early next year.
The BRRD paves the way for bail-ins of bond-holders and bank deposits over a certain amount. Heta does not have depositors and so it is bond-holders who will incur the losses.
Bloomberg reports that among Heta's bondholders are Deutsche Bank and UBS and Pacific Investment Management Co. (PIMCO). Whether these institutions are strong enough to absorb their losses remains to be seen.
We will begin to get an idea during the course of this month as Bloomberg reports:
"More than 9.8 billion euros worth of debt is affected, including senior notes worth 450 million due on March 6 and 500 million on March 20."
If Deutsche Bank or UBS were to be significantly affected by the demise of Heta, we may see a renewed banking crisis and contagion concerns would reemerge.
While the bail-in at Heta will only have immediate consequences for bond-holders, it is important to realise that the BRRD includes provisions for the confiscation of deposits of over a certain amount.
“Bail-in is now the rule” as Irish finance Minister Michael Noonan warned in June 2013. Noonan admitted that the move to not maintain deposits as sacrosanct was a “revolutionary move.” That it was and yet investors and depositors remain blissfully unaware of the risks of bail-ins both to their own deposits but also to the wider financial system and economy.
Bail-ins are now the rule globally and this is the case in practice and is no is longer simply a theoretical talking-point. That the Austrian government rushed ahead in ratifying the directive last month suggests that there are rumblings beneath the surface and other governments could quickly follow suit.
Indeed, we expect other European countries, the UK, U.S., Canada, Australia and most western financial regulators and authorities to follow suit. If this does indeed transpire it should be seen as a warning sign for bond-holders and indeed depositors to take precautionary measures as soon as possible.

Should a resurgence of the global banking crisis occur it is likely to be worse than last time as the liabilities in the banks are much greater and the many large sovereign nations are in effect insolvent.
With interest rates at or below zero percent and many major central banks still engaging in QE, central banks have very few monetary tricks up their sleeves. they have pulled rabbits out of hats one too many times.
We urge readers to diversify deposit holdings and acquire allocated gold and silver held outside of the banking system to protect their wealth during the next phase of the banking crisis.
Austrian bondholders today … international depositors tomorrow ...
Download Protecting Your Savings In The Coming Bail-In Era (11 pages)
Download From Bail-Outs To Bail-Ins: Risks and Ramifications - Includes 60 Safest Banks In World (51 pages)
MARKET UPDATE
Today’s AM fix was USD 1,207.75, EUR 1,081.20 and GBP 786.14 per ounce.
Yesterday’s AM fix was USD 1,216.75, EUR 1,084.93 and GBP 789.48 per ounce.
Gold fell 0.46% percent or $5.60 and closed at $1,205.50an ounce yesterday, while silver slipped 1.21% or $0.20 to $16.37 an ounce.

Gold in Singapore edged up at the end of trading on Tuesday, after bouncing back from a dip below $1,200 an ounce, as the U.S. dollar retreated from an 11-year peak against a basket of currencies.
Spot gold was up 0.2 percent at $1,209.60 an ounce towards the end of trading in Singapore after it dipped to a session low of $1,194.90.
The trend of rising gold and silver prices in Asian trade and falling prices in European and U.S. trading continues.
Is this further evidence of manipulation? Many analysts increasingly think so.
Seven out of seventeen of the Fed's members have now said they want the option of an interest rate hike in June on the table, or have lobbied for an earlier increase - in expectation that inflation and wages will jump higher.
In late morning trading in London, gold for immediate delivery is trading at $1,207.71 up 0.07 percent. Silver is trading at $16.39 down 0.15 percent while palladium is at $1,183.80 or down 0.28 percent.
Barclays noted in its 2014 annual report that it has been providing information for an investigation into precious metals by the U.S. Department of Justice (DoJ). The Wall Street Journal reported in an article last week that the DoJ and the Commodity Futures Trading Commission (CFTC) are investigating at least 10 major banks for possible rigging of the precious metals markets.
The banks involved in producing the fixes for global gold, silver, platinum and palladium benchmarks, said last year they would no longer administer the standards.
A new silver benchmark is operated by CME Group and Thomson Reuters, while the London Metal Exchange produces platinum and palladium benchmarks. The Intercontinental Exchange (ICE) will manage a new gold benchmark beginning March 20th.
Breaking News and Updates Here
- advertisements -



What is so unusual about bondholders of a failing company losing money?
“the many large sovereign nations are in effect insolvent.”
Late news: they have been insolvent for many decades.
All we need to arrive at this conclusion is to examine ‘Financial Reports of the US Government’. I began to study them for the year 2004. In that report, we are told that the US Government had $1.6 trillion in assets and some $45 trillion in liabilities (and “social responsibilities). That is, it had a net equity of minus $43 trillion, a bankrupt if there ever was one.
And to arrive at this number, the government had to invent several fictions that reduced this minus $43 trillion from a massively larger number.
My article, ‘What Price Gold… $7,000… $70,000… $infinity?’ gives a much fuller context.
In other words if you possess or control large amounts of property (a business or paper investments), you have much to worry about – and little time to provide for protection from the approaching storm; especially if you have paper investments.
"U.S. Depositors" -- LMFAO, that's some funny shit right there.
LoL! .....now that you mention it!
I would not call the Australian big four banks safe, sitting on $1.30 collateral for every $100 of mortgages at the tip of a property bubble and with a collapsing mining bubble.
Maybe because the RBA can still make money 2% more freer-er-er
SHTF
The sheeple are lined up for shearing.
What comes next?
How the hell does Kanada make the safe banks list? The financial system must be even more screwed up than I thought it was.
The 2013 budget clearly instituted depositor bail-ins, and we have a property/housing bubble that is visible to most. Ontario - 10 years ago, was the mfg center of Kanada has shivelled, and died under a decade of Liberal green policies, and the oil patch is treading water with just it's nose to breathe through.
Drop the price of oil by another $15.00 and the last firing cylinder of the sputtering Kanadian economy stops firing. Our slow descent into poverty, will become a rapid descent into absolute, and complete ruin.
Every time I walk into the bank to make a large withdrawl, the reason I give, is that I think they're insolvent.
What safe banks - like telling me the Corleones are better than the Tataglias - Blankenship better than Diamondshit. And Noonan of Ireland - a fukin joke - the only reason this member of the PIIGS is in the background is all the Micks emigrated again. If the ones who had to leave were still there - they'd be worse than Spain or Portugal - look at their debt load to GDP
All reserve banks are insolvent.
buy gold at 13:30 sell at 01:00 - problem solved!
So... has anyone bothered to ask what happened to the 7.6B?
Such questions are politically incorrect if concerning sums greater than millions nowadays.
"Holes" are just "discovered" when appropriate. Even the financial press doesnt bother to ask where the money went or if it was there in the first place.
One small shitbank, 7.6 billion Euros.
Our milky way has between 200 and 400 billion stars.
Corzined
UN Chief: Israel may have purposely targeted UN base in Lebanon, killing Spanish soldier – VIDEO
The whole Syria proxy war is dirty. She had proof and they killed her.
New Anonymous op as White House still ignores murder of American reporter Serena Shim in Turkey
https://www.youtube.com/watch?feature=player_detailpage&v=NbpcTwwtW3M
heh heh..
I am likely the only guy on ZH that has the soundtrack to "Wild in the Streets" on vinyl.
Good infographic!
the US need only print the money necessary to pay FDIC account holders, which would be inflationary, and would defer the problem (kick the can). a few years ago the fear was that they couldnt handle a run on the banks, now the fear is the bail-in. no matter what you are afraid of you need to respect the new cycle of fear and loathing, which follows the presidential cycle. at the end of every tenure, at the changing of the guard, the oligarchs become nervous about will they find the next puppet to run the government, and who will it be? the transition from bush to obama was pretty seamless (and eight years have proved that the oligarchs found their man, now the search is on again) the real problem is probably next year. just watch to see who emerges, who goldman backs, and how the media treats them, and do they think Yellen is doing a good job. then BTFD, unless of course some firebrand runs a populist campaign and the media actually reports it. hmmm (remember when they dropped dean like a hot potato?)
expect to hear bill gross spewing his book talking wisdom in 3, 2, 1....
It already happened.. a while back.
Remember Obama’s GM takeover / payoff to the UAW?
Obama gave the senior position to the union and hosed the bond holders.
As was proper. Pensions are deferred wages. Bond holders are speculators by definition. The Courts have consistently held deferred wages above bond holders.