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Bank Deposits No Longer Guaranteed By Austrian Government

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Bank Deposits No Longer Guaranteed By Austrian Government

- Austria will remove state guarantee of bank deposits
- Austrian deposit plan given go ahead by the EU
- Banks to pay into a deposit insurance fund over 10 years
- Fund will then be valued at a grossly inadequate €1.5 billion
- New bail-in legislation agreed by EU two years ago
- Depositors need to realise increasing risks and act accordingly
- “Bail-ins are now the rule” and ‘Bail-in regime’ coming

Bank deposits in Austria will no longer enjoy state protection and a state guarantee in the event of bank runs and a bank collapse when legislation is enacted in July. The plan to ensure that the state is no longer responsible for insuring deposits has been readied by the Austrian government in conjunction with the EU two years ago according to Die Presse.

goldcore_chart1_9-04-15
Currently, Austrians have their bank deposits guaranteed to a value of €100,000 - the first half to be provided by the failing bank and the other by the state. From July, however, the state will be removed from the process and a special bank deposit insurance fund is to be set up and paid into by banks to meet potential shortfalls.

The fund will be filled gradually over the next ten years to a value of €1.5 billion. In the the event of a failure of a major bank in the intervening period the legislation will allow the fund to borrow internationally although who will provide such funding and on what terms is not clear, according to Austria's Die Presse.

However, even when the scheme is fully funded it is clear that €1.5 billion will be woefully inadequate to deal with a bank failure.

€1.5 billion amounts to a mere 0.8% of total deposits in Austria. It is highly unlikely that deposits of any major bank would be adequately covered and in the event of multiple concurrent bank failures it is likely that most savers would be wiped out.

Die Presse gives the example of Bank Corp in Bulgaria. When that bank failed it had €1.8 billion in deposits but there was only €1 billion in the deposit insurance fund.

On a positive note "inheritances, real estate transactions, a dowry or a divorce [will be] be protected for three months, even up to an amount of 500,000 euros," according to Die Presse (via google translate).

It is telling that, as Die Presse reports, the framework for the legislation was agreed in Europe two years ago and the legislative change has to take place by this summer. It was on June 27th, 2013 that Irish Finance Minister Michael Noonan made his infamous declaration that "bail-in is now the rule."

The Die Presse story suggests that the Austrians may have gotten a derogation or an exemption from the new bail-in legislation which was enacted in 2013.  “Bail-in is now the rule” as Irish finance Minister Michael Noonan warned in June 2013. Noonan admitted then that the move to not maintain deposits as sacrosanct was a “revolutionary move.” That it was and yet investors and depositors remain very unaware of the risks of bail-ins both to their own deposits but also to the wider financial system and economy.

At that time average depositors with deposits of less than €100,000 were given no indication that their savings may be at risk even as EU institutions were working on removing state liability for such deposits.

Romania's Bursa newspaper points out that this is not some monetary experiment being foisted upon some peripheral Eurozone country. Austria is regarded as being part of the EU's "hard core".

What unfolds in Austria will likely follow across the EU. It may be that Austria was prompted to enact this legislation first among its European partners precisely because it anticipates major banks failures in the wake of the failure of its "bad bank", Heta.

Also many Austrian banks have large exposures to Eastern European countries and property markets. Austrian banks are the most exposed to potential losses from tougher sanctions on Russia according to Fitch and the IMF.  Swedish, French and Italian lenders are also vulnerable, the International Monetary Fund also warned.

Deposits in the insolvent banking system are no longer safe. So where is one to place one's savings?

goldcore_chart2_9-04-15

As Germany's Deutsche Wirtschafts Nachrichten opines "depositors will have to thoroughly research the situation of the bank they place their savings in". It adds, "this task is extremely difficult, because of the muddy financial statements and of the complexity of the interdependencies in the banking system".

While Austria may be the first in enacting this legislation there is no guarantee that savers, particularly in the peripheral nations, will receive any indication that their deposits may be at risk.

Emergency legislation can be drawn up over-night - as was the case when Ireland was "bailed-out" or rather Ireland’s banks were bailed out and Ireland’s tax payers were bailed in. The developing bail-in regimes, means that soon individual and corporate depositors could see their savings and capital ‘bailed in’.

These are important developments. Average savers can no longer rely on the state to protect their deposits. They provide a good reason for depositors to allocate some of their funds to physical gold stored outside of the banking system, in the safest jurisdictions in the world.

Must Read Guides:
Protecting Your Savings In The Coming Bail-In Era (11 pages)
From Bail-Outs To Bail-Ins: Risks and Ramifications –  Includes 60 Safest Banks In World (51 pages)

 

MARKET UPDTE

Today’s AM LBMA Gold Price was USD 1,196.00, EUR 1,113.33 and GBP 808.49 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,211.10, EUR 1,113.66 and GBP 811.40 per ounce.

Gold fell 0.59 percent or $7.10 and closed at $1,203.20 an ounce yesterday, while silver slid 2.13 percent or $0.36 closing at $16.52 an ounce. Gold has remained robust in most currencies except the dollar and remains above EUR 1,100 and GBP 800 per ounce.

Gold fell in dollar terms for its third session after some traders interpreted comments from the U.S. Fed minutes released yesterday as hawkish. Market participants still think a June interest rate hike remains a possibility despite the appalling jobs number last Friday.

goldcore_chart4_9-04-15
The yellow metal dipped below its psychological $1,200 per ounce level yesterday as the U.S. dollar surged higher. The greenback hit a one week high against the euro at 1.0730. Silver sunk to a three week low.

Gold prices in Singapore was off 0.5 percent at $1,196.30 an ounce near the end of day trading prior to ticking slightly higher in London.

Holdings of SPDR Gold Trust, the world's largest gold ETF, edged down to 733.06 tons on Wednesday, from its previous close of 735.45 tons on Tuesday.

Technical analysis suggest gold could drop to $1,181 as it has cleared a support at $1,205, based on a Fibonacci retracement analysis. The next support may be at $1,181, the 23.6 percent level.

Physical gold buying in China has briefly waned but powerhouse India is still seeing robust physical demand.

Fed governors, Dudley and Powell yesterday alluded to scenarios in which the central bank could make an initial move earlier than many now expect and then proceed in a slow and gradual manner on further rate increases.

As ever, many members of the Fed talk a good hawkish talk but never walk the hawkish walk. Meaning that despite continual talk of interest rate rises for years now - none never come. They will some day but it may not be this year.

In Europe, gold for immediate delivery in the late morning was trading at $1,196.30 or down 0.41 percent. Silver was $16.29 or off 1.16 percent and platinum was $1,159.55 or down 0.32 percent.

Breaking News and Award Winning Research Here

 

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Thu, 04/09/2015 - 16:25 | 5976324 Caleb Abell
Caleb Abell's picture

This should not be a problam for a rational saver.  Since banks pay zero interest, a saver can get the equivalent return by keeping their money under their mattress, with no risk of losing it in a bank failure.

Thu, 04/09/2015 - 14:11 | 5975813 dynomutt
dynomutt's picture

So, the central banks are hostage-takers, and to show you all that they're serious, they shot one of the hostages, Cyprus.

 

They want to get you to take your money out and spend, SPEND, SPEND!

Thu, 04/09/2015 - 13:00 | 5975577 hendrik1730
hendrik1730's picture

Anybody who now leaves money in a bank receiving zero or even negative interest and having no protection or guarantee whatsoever on a bankrun occurring is a fool. Buy physical gold and store it outside of the banking system.

Thu, 04/09/2015 - 13:48 | 5975734 disabledvet
disabledvet's picture

Shut up you fucking dope

Fri, 04/10/2015 - 17:25 | 5980433 Dame Ednas Possum
Dame Ednas Possum's picture

Surely you haven't forgotten that one should simply not go full-retard.

Thu, 04/09/2015 - 12:51 | 5975553 Johnny Fiat and...
Johnny Fiat and The Contangos's picture

We borrowed some money from some folks

Thu, 04/09/2015 - 12:42 | 5975524 Bagbalm
Bagbalm's picture

July huh?

Thu, 04/09/2015 - 12:34 | 5975501 QQQBall
QQQBall's picture

$1,200 psychological barrier? Say what?

Thu, 04/09/2015 - 12:22 | 5975484 JRobby
JRobby's picture

Soup lines

Tents

Thu, 04/09/2015 - 12:16 | 5975464 GRDguy
GRDguy's picture

Interestingly enough, Yellen is not part of the G30, nor was Bernanke, but Alan Greenspan was.  Now we know who's the patsy.  Draghi and Carney are both current members.  G30 was initially funded by the Rockefeller Foundation. Nothing new under the sun.  http://en.wikipedia.org/wiki/Group_of_Thirty

Thu, 04/09/2015 - 11:28 | 5975328 Monty Burns
Monty Burns's picture

I'd have thought all along that Austria was probably the safest country in the EZ.  Just shows how wriong one can be....

Thu, 04/09/2015 - 14:53 | 5975993 JRobby
JRobby's picture

Iceland seemed safe...........

Thu, 04/09/2015 - 11:39 | 5975367 Monty Burns
Monty Burns's picture

Actually, on second thoughts, maybe they are one of the strongest countries. Now that's a scary thought.

Thu, 04/09/2015 - 11:35 | 5975357 GuusjA
GuusjA's picture

Doordat AFM-voorzitter Merel van Vroonhoven nog steeds de normen van het GELD=ZUURSTOF-paradigma niet eigen heeft gemaakt kan ze moeilijk verwachten dat de financiële sector uit eigen beweging het SCHULD=H00P-principe gaat verlaten. Immers zolang de muziek speelt (het Amerikaanse Congres heeft nog steeds niet ingestemd om het systeem 'Leven en Laten Leven' in te voeren), moet je iets verzinnen om de 3e SpinozaGolf te overleven.

 

http://www.nrcq.nl/2015/04/09/afm-financiele-sector-beseft-onvoldoende-d...

 

Voor China duurt één en ander te lang en begint daarom haar eigen versie van het systeem 'Liegen om te Leven'.

 

http://www.volkskrant.nl/economie/ook-imf-wil-samenwerken-met-aziatische...

 

De Iraanse leider ayatollah Khamenei ziet ondertussen het militaire ingrijpen van Saoedi-Arabië in Jemen als genocide. De geestelijk leider noemde de Saoedische keuze om het GEWELD=MACHT-principe te gebruiken een misdaad die bestraft kan worden door een internationaal strafhof. 

 

http://www.nrc.nl/nieuws/2015/04/09/iraanse-leider-haalt-ongekend-hard-u...

 

De VN lijkt steeds meer draagvlak te krijgen voor ...

Thu, 04/09/2015 - 14:19 | 5975848 highly debtful
highly debtful's picture

Publiceer in het Engels op Zerohedge of publiceer helemaal niks / post in English on Zerohedge or don't post anything at all.

Thu, 04/09/2015 - 11:40 | 5975369 angel_of_joy
angel_of_joy's picture

Wrong language.

Thu, 04/09/2015 - 11:26 | 5975322 Jano
Jano's picture

banks would be foolish not to use this financial nuclear weapon against plebs.
leverage 1:99 and go bust. 0.8% to cash down.

Thu, 04/09/2015 - 11:01 | 5975248 SocialistPig
SocialistPig's picture

This should make bank runs so much more exciting. 

Thu, 04/09/2015 - 10:58 | 5975233 taoJones
taoJones's picture

Odd how Canada is in the "safer" category in spite of recent legislation that specifically mentions bank bail-ins

Thu, 04/09/2015 - 10:54 | 5975220 Shitgum Suicide
Shitgum Suicide's picture

Banks, what are they good for?
Absolutely nothin
Huh say it again

Banks what are they good for?
Absolutely nothin
Hey hey hey

Isn't it funny how when you switch the word bank and war that song continues without missing a beat?

Thu, 04/09/2015 - 10:24 | 5975109 actionjacksonbrownie
actionjacksonbrownie's picture

#3 FTW

Thu, 04/09/2015 - 09:55 | 5975005 crazytechnician
crazytechnician's picture

BITCOIN

Thu, 04/09/2015 - 09:52 | 5974999 RaceToTheBottom
RaceToTheBottom's picture

I think they should separate the banks into two groups and only guarantee the ones that operate as utilities.  The gambling banks never should have been guaranteed, including the both the banksters and the depositors.

Having two types of banks allows the public to decide who they want to deal with.

Thu, 04/09/2015 - 14:54 | 5975998 JRobby
JRobby's picture

The regulators are really good at spotting the gambling banks.........................................

Thu, 04/09/2015 - 14:52 | 5975992 ThroxxOfVron
ThroxxOfVron's picture

http://en.wikipedia.org/wiki/United_States_Postal_Savings_System

 

"The United States Postal Savings System was a postal savings system signed into law by President William Howard Taft and was operated by the United States Post Office Department, predecessor of the United States Postal Service, from January 1, 1911 until July 1, 1967. The system paid depositors 2 percent annual interest. Depositors in the system were initially limited to hold a balance of $500, but this was raised to $1,000 in 1916 and to $2,500 in 1918. At its peak in 1947, the system held almost $3.4 billion in deposits. The system originally had a natural advantage over deposit-taking private banks because the deposits were always backed by "the full faith and credit of the United States Government." However, because the Federal Deposit Insurance Corporation gave the same guarantee to depositors in private banks, the Postal Savings System lost its natural advantage in trust. "

Thu, 04/09/2015 - 11:00 | 5975242 Kprime
Kprime's picture

Don't know how old you are. look up Glass-Steagall Act

Thu, 04/09/2015 - 11:21 | 5975304 RaceToTheBottom
RaceToTheBottom's picture

Yep, agree.  No new ideas are required, just undo and stop doing corrupt ones.

Thu, 04/09/2015 - 09:45 | 5974974 Madcow
Madcow's picture

Most people simply do not care if they lose all their money. 

A tiny minority will try to protect their life savings by taking their money out of the bank. 

Gov-Co doesn't want to see that - so those people will probably end up in prison.

Thu, 04/09/2015 - 12:46 | 5975536 KnuckleDragger-X
KnuckleDragger-X's picture

Not so much don't care as don't understand and the people who do understand have already started protecting themselves in various ways. It's an easy walk to the slaughter house but it tends to be a one way trip....

Thu, 04/09/2015 - 09:41 | 5974947 small towel
small towel's picture

The deposors cannot be expected to predict future failures and coming calamities.

 

This seems like quite a big deal.

Thu, 04/09/2015 - 11:52 | 5975399 astoriajoe
astoriajoe's picture

It seems pretty straightforward and direct.

I doubt it will be that way in other countries.

Thu, 04/09/2015 - 09:20 | 5974840 Urban Redneck
Urban Redneck's picture

Does any else see the irony in identifying the very first country to pass legislation and regulations facilitating bail-ins as the #1 country for those seeking "safety from bail-ins"?

Thu, 04/09/2015 - 13:23 | 5975659 PTR
PTR's picture

"Smile if you know the difference between irony and sarcasm"

Thu, 04/09/2015 - 09:10 | 5974827 Jonesy
Jonesy's picture

Guaranteed, to get robbed.

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