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Bail-Ins at “Bad Bank” Unconstitutional Says Austrian Court
Bail-Ins at “Bad Bank” Unconstitutional Says Austrian Court
- Austrian decision to renege on guarantees made to junior bondholders overturned
- Court does not overrule bail-ins per se
- Bail-in legislation still in place across Europe
- EU deadline to implement bail-in legislation by end of this month
- Depositors - savers and capital of SMEs exposed to bail-ins
An attempt by Austria to bail-in junior bondholders at the Heta “bad bank” has been overturned by the highest court in the country.
Last year Austria passed legislation which annulled guarantees previously given by the state of Carinthia to bondholders of Heta, effectively writing off €890 million.
Heta was set up to manage the assets of failed lender Hypo Alpe-Adria-Bank. Carinthia state had guaranteed around €10 billion of Heta debt - a figure which dwarfed its own revenue more than four fold, which eventually forced the Federal government to cover the guarantee.
The ruling does not outlaw “bail-ins” per se. It simply ensures that guarantees given to bondholders cannot be retrospectively revoked.
The Austrian government has ploughed €5.5 billion of taxpayers’ money into Heta. When auditors found a €7.6 billion hole in its balance sheet in March the government said it would not pay “one single euro” more to the bad bank which is to be wound down.
A debt moratorium is in place - based on the Bank Recovery and Resolution Directive (BRRD) which makes “bail-ins” the norm across the EU - while the process is worked out. The bondholders who had been burned will now enter that program.
However, court president Gerhardt Holzinger says “he expects to deal with more complaints about…Heta’s debt moratorium,” according to Bloomberg.
Bail-in legislation is still in place across Europe. The European Commission recently threatened to take legal action against those nations who had not yet ratified the BRRD and gave them just two months (until the end of July) to adopt the new EU bail-ins rules. The BRRD purports to protect taxpayers from the need to bail out banks but appears to be again favouring the interests of large banks over those of prudent savers and indeed small and medium size enterprises who could have their savings confiscated.
Under the legislation, government guarantees on bank deposits - usually up to a value of €100,000 - are being quietly disposed of. In their place will be a type of insurance fund paid into by the banks which will be woefully inadequate.
Must read guides on bail-ins:
From Bail-Outs To Bail-Ins: Risks and Ramifications – Includes 60 Safest Banks In World
Protecting Your Savings In The Coming Bail-In Era
MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,096.75, EUR 991.01 and GBP 701.65 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,095.60, EUR 990.06 and GBP 702.13 per ounce.
Gold/Euro FX Rate - 2000 to July 2016 (Thomson Reuters)
Gold and silver on the COMEX both rose marginally yesterday - to $1,095.60/oz and $14.68/oz.
Global gold demand fell in the second quarter as China poured funds into equities which had promised better returns according to GFMS. Chinese stocks have collapsed by 30% in recent weeks - a real case of out of the frying pan and into the fire.
Imports by India dropped to the lowest in five quarters, the quarterly report said yesterday.
A plunge in Chinese share prices from mid-June has not helped bullion in the short term according to the report. However, we believe that the plunge in Chinese stocks will be bullish in the long term as the Chinese again realise the importance of gold as a safe haven asset.
GFMS is optimistic that global demand and prices could start to pick up in the final quarter of the year. China and India are the world's top gold buyers and demand for the entire year is expected to be elevated and near record levels seen in recent years.
This morning in European trading, silver for immediate delivery is 0.4 percent lower at $14.70 an ounce. Spot platinum rose 0.3% percent to $990 an ounce, while palladium rose 0.5% percent to $626 an ounce.
Learn the importance of owning allocated, segregated gold that you can take delivery of here
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The law from the CHristian Democratic Finance Minister made 2 different kinds of investors: those, who have to pay the losses in bail-in and those, who would not suffer. (of course those who would not suffer are his electorate). The highest court decided, that it is unconstitutional to make 2 categories, based on the constitution, which defines everybody equal, they scrapped it. Therefore either everybody bails-in, or nobody.
this is the most widely published explanation in austrian news.
once more politicians try to make some populistic points.
has nothing to do with the banks. has to do with a common sense.
"Bail-Ins at “Bad Bank” Unconstitutional Says Austrian Court "
How are State guarantees and bail-outs CONSTITUTIONAL?
IF so: WHERE EXACTLY in the Austrian Constitution are the rules pertaining to Bank bail-ins defined?
NOWHERE. THEY DO NOT EXIST.
Bail-ins are NOT defined in ANY part of the Austrian Constittion and are thus UNCONSTITUTIONAL.
ANY & ALL post-facto discussions of these UNCONSTITUTIONAL bail-outs entirely miss the point.
THESE ARE ILLEGAL ACTS: THEFTS FROM THE PUBLIC TREAUSRY, THEFTS FROM PRIVATE INDIVIDUALS, AND THEFTS FROM BUSINESSES.
-UNCONSTITUTIONAL.
-ILLEGAL.
-THEFTS.
Did you read the following lines in the article?
What has been declared unconstitutional is the government retrospectively revoking guarantees given. I am not conversant with the Austrian Constitution, but it wouldn't be suprising to find some prohibition against the government dishonouring the promises made or modifying them with retrospective effect.
supreme court too busy with Irish with a dutch twist. SCOTUS is corrupt_US. Well happy to learn that the private FED banks get 6% return.... and bonds get well
http://www.reuters.com/investigates/special-report/scotus/
and POTUS is in full executive power to have the tpp 600 corporate advisers (Corrupt lawyer Nazi's) have the whole thing planned... This power grab is unbelievable. Where is accountability or they just using the drug money protected by our air traffic control or tax havens(heterocyclic).
"Sweet Caroline" "Sweet Caroline" "Sweet Caroline" "Sweet Caroline" I think the whole country's balls are under inflated.
Looks like you would be reckless to maintain bank deposits or buy bank debt.
Youre way out at risk AND you don't get any compensating return. insanity.
Luckily I don't have any money . No one will believe or act on this stuff and then it will be too late.
Bankers would never lend to the public on an unsecured basis for paltry interest. Why would/should the public lend to bankers on an unsecured basis for paltry interest?
The only reason bankers exist, and have become so wealthy is because people still line up, like lemmings, to lend (or in banker parlance, "deposit") money to the bankers in exchange for minimal interest.
Islamic finance, that is, where debt is prohibited, and all savings/investment must be made in equity, is a far superior system than one based on debt which is subject to significant periods of inflation or deflation. Say what you will about the rest of Islam and its beliefs, but the prohibition on usury is one area that people would be highly advised to pay attention to.
Someone should appeal to the US Supreme Court jesters. They'll fix it.
If anyone actually took this seriously they should demand serious returns on bank deposits.