It's Official: Canadian Bank Depositors Are Now At Risk Of Bail-Ins

Tyler Durden's picture

Earlier today, Canada's new Liberal government unveiled a stimulus budget meant to revive slumping growth with a surge in infrastructure spending and said it would run a deficit nearly three times larger than promised during last year's election.

The government projected a C$29.4 billion ($22.5 billion) deficit for fiscal 2016-17 and gave no target date for returning to a balanced budget. This budget broke virtually all pledges the Liberals made before the election, including running just three years of deficits of up to C$10 billion before balancing the books by fiscal 2019-20.

"We are seizing the opportunity to invest in people and the economy, and to prepare Canada for a brighter future," Finance Minister Bill Morneau said.

What he is really seizing is the Bank of Canada money printer, because in order to monetize this surging deficit, the BOC will soon have to unleash its own QE in the coming months. 

As Reuters adds, because the Liberals command a majority in the Canadian Parliament's House of Commons, the budget is guaranteed to pass.

Which is bad news not so much for the Canadian Dollar, which will certainly devalue in the coming months as the market prices in what a massive surge in deficit spending means although so will all other currencies as the global debasement race accelerates once more in a few short months, but for bank depositors, because deep inside the budget announcement, in the section discussing "tax fairness and a strong financial sector", we have official confirmation that Canada has just become the latest country to treat depositors as the bank creditors they are, and as such, they too will be impaired, or "bailed-in" the next time a Canadian bank needs to be rescued.

The specific text:

Introducing a Bank Recapitalization "Bail-in" Regime


To protect Canadian taxpayers in the unlikely event of a large bank failure, the Government is proposing to implement a bail-in regime that would reinforce that bank shareholders and creditors are responsible for the bank’s risks—not taxpayers. This would allow authorities to convert eligible long-term debt of a failing systemically important bank into common shares to recapitalize the bank and allow it to remain open and operating. Such a measure is in line with international efforts to address the potential risks to the financial system and broader economy of institutions perceived as “too-big-to-fail”.


The Government is proposing to introduce framework legislation for the regime along with accompanying enhancements to Canada’s bank resolution toolkit. Regulations and guidelines setting out further features of the regime will follow. This will provide stakeholders with an additional opportunity to comment on elements of the proposed regime.


Bail-in Regime for Banks


Canada’s financial system performed well during the 2008 global financial crisis. Since that time, Canada has been an active participant in the G20’s financial sector reform agenda aimed at addressing the factors that contributed to the crisis. This includes international efforts to address the potential risks to the financial system and broader economy of institutions perceived as “too-big-to-fail”. Implementation of a bail-in regime for Canada’s domestic systemically important banks would strengthen our bank resolution toolkit so that it remains consistent with best practices of peer jurisdictions and international standards endorsed by the G20.

This new "bail-in" regime is spun as benefitting taxpayers; what isn't mentioned is that most of those taxpayers who will be "protected" also happen to be the impaired depositors (also known as creditors) in these soon to be bailed-in banks, which begs the question: just who or what is being protected here?

Should oil remain at its current price, or drift lower again, we will certainly find out in practice, because as even Canada's regulator is now warning, there is far less stability than meets the eye behind the "rock solid" balance sheet facade of Canada's banks.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Soul Glow's picture

Give up your money to your socialist overlords or else no igloos for you!

Kirk2NCC1701's picture

Clever and affluent Canucks are already front-running this organized "Tax On Savings".

Won't say 'How', lest the leeches in Ottawa and on Bay St. tap into those Methods also.

BurningFuld's picture

But unlike in the USA if the current Liberal Government fucks up in Canada they will cease to be a party in the next election.

Why the fuck can't you do that south of the board? (of Canada)

Boing_Snap's picture

Election? Who says there's going to be another election, might just be another State of Emergency, only permanent. Now who was the PM when we last had a SoE? Dang if it weren't Papa Trudeau those darn FLQ terrorists, kidnapping a few government folks, bombing a Stock Exchange and suddenly its an SoE.

This time I wonder if the terrorists are another homemade affair? Certianly not as romantic as French independence inspired by Che and Fidel, just brutish ethnic cleansing in the Holy Land.


mtl4's picture

All the governments in the world are up to their dirty tricks to stay in power, Canada won't be any different.  Governments are always hunting for cash so watch out as assets rise due to people trying to take money off the grid.  We may also see the top on these hot Vancouver/Toronto real estate markets soon as they begin to impose big taxes on profits from sales on 2nd homes and investment properties.

tarabel's picture



Clever and affluent Canucks...

Translation: Expats.

asteroids's picture

T2 (Trudeau #2) and his bankers are insane. Perhaps that's the reason why Canadian banks are now on the most shorted list on the TSX.

Rakshas's picture

Funny you should mention that, I was just discussing this very concept with some of my expat Canadian Colleagues just yesterday afternoon; shorting the Canadian banks using borrowed money from the same Canadian banks and use the interest expense as a tax deduction to fuck thier tax revenue agency......... needs more work and some very proffesional assistance but conceptually I really love the idea of feeding each snake the tail of the other .......... eat my pretties eat ........... {ok at this point imagine a Dr Evil Belly laugh}

mtl4's picture

Man, I love the concept of having the banks/CRA eat the risk..........feel free to share more if you get the details worked out!

Normalcy Bias's picture

J-Roc will survive this shit tizzite! Know what I'm saaaayyyynnnn??

nmewn's picture

Oh Canaduh!


Wut? Young Trudeau' got dis all under control or is it the queen mother? ;-)

Linglishboy's picture

amaricunt, how's obama doing ?

tarabel's picture



Running on autopilot. 300 days and we're rid of him automatically.

monk27's picture

Yeah, Hitlery is so much better...

tarabel's picture



What are you talking about? We can crowdfund a bribe for her and get whatever we want.

marx_hyrizer's picture

Genius!!  Why didnt anyone else think of that??

nmewn's picture

He's doing everything he set out to do, hoser.

darteaus's picture

Prepare for your 401K to become a 201K.


Farqued Up's picture

Aren't all of the collaterals nothing more than 100% debt? They're guaranteeing debt with other debt. I'm totally confused.

Normalcy Bias's picture

I'd suppose it'd depend on who's doing the accounting. However, there is a Tsar Bomba of derivatives hanging over all of our heads.

bluskyes's picture

"full faith and credit" If you believe it has value - it does!

Rakshas's picture

I love Salt Lick Tuesdays!!!!!

401K of Dooom's picture

Heeey buddy, you just gave me a great idea.  If government can collaterize debt., why can't I do the same with my own debt, especially for tax revenue purposes?

Stormtrooper's picture

Much of my 401k is already converted to shiny yellow stored in vaults.  Will they just confiscate?  I guess I should redirect more towards shiny .308 to provide some justice just in case.

Stox's picture

Where does that say DEPOSITORS are at risk?  Not seeing it.

Soul Glow's picture

A bank deposit is already unallocated.  Not sure why they need to make these rules when the bank already has the right to take deposits.

Pheonyte's picture

Depositors = creditors

TradingIsLifeBrah's picture

It says "convert long term debt" unless you have multi year CDs, your deposits are all short term. Most people would classify in short term even if depositors equalled creditors

FIAT CON's picture

On pages 144 & 145 of the Canadian Economic action plan of 2013 Economic Action Plan 2013 -


Rock On Roger's picture

Yes, the bail-in scheme was around long before our present government revealed it.

pitz's picture

Bail-ins have always been the rule, not the exception, in both Canada and the US.  I think people forget this, and somehow think that bail-outs were the norm. 

onagoth's picture

Youre not seeing it because its not there... Canadas bail in framework specifically excludes deposits and only targets specific forms of long term debt. 


The framework is available on govt websites to anyone who doesnt support fear mongering

Charming Anarchist's picture

Oh, I get it! 

We are being forewarned!  

Theonewhoknows's picture

Socialists be socilisism'ing. I don't think noone had any doubts about PM of Canada. But its the same as the FED and other central planners *cough* BANKS, I meant BANKS!

adanata's picture



Stox... if the "depoitors" are the banks "creditors" then their deposits can be used to recapitalize the bank... as it sinks. They just keep tightening the noose...  can't you feel the hot breath on your neck? As the saying goes: it's like watching a train wreck in slow motion.

Normalcy Bias's picture

...but, but, Trudeau promised them hopey changey!

RealistDuJour's picture

Now you're just being silly!  He promised us sunshine and rainbows!

Publicus_Reanimated's picture

That's how the lefties do it.  Lenin's slogan was "Peace, land and bread".  Once they're in office, well...

tarabel's picture



The sheer genius of it all.

So.... the government is going to recapitalize a failing bank by converting shareholders into... shareholders.

Somehow, I expect that part of the scheme will not result in a single dime of recapitalization taking place.

But if the depositors get robbed, then the original shareholders will have their failed asset recapitalized by including them in the new shareholder pool that is created entirely with someone else's money yet I suspect that they will still hold the lion's share of the total stock issuance.

It's very interesting to see how confident the authorities are that ordinary people will not grasp the true intent of this effort. So confident that they can actually publish it in advance and nobody is smart enough to figure it out.

I might be more in favor of this sort of proposal if it were to start by closing out every dime from the investors and directors of the corporation. You get nothing, to quote Willy Wonka. As it stands, this is a blatant bail-out of the current shareholders and officers at the complete expense of their customers-- who will not be given any significant amount of shares or have any control over the asset they have just been involuntarily forced to buy with their life savings. I'd even bet that their loans from the bank will still be enforced. Truly satanic.

Come out of her, My people.

frankly scarlet's picture

some of the biggest CDN bank depositors are the public pension plans start messin' with them a your average polite CDN will show his true form as something of a cross between a wolverine and a drug crazed Ty Domi or a Dave "the Hammer" Shultz... (hockey tough guys for the uninitiated)

Yukon Cornholius's picture

I'd prefer Dave 'cement head' Semenko, but you have a good point.

Frankie Carbone's picture

Indeed, they are going to take to the streets with their government registered, single shot 12 gauges - complete with the maximum allowable 15 shells -  and really put the fear of God into the State!

Fucking idiots. We told you so. 

kiwimail's picture


 It's very interesting to see how confident the authorities are that ordinary people will not grasp the true intent of this effort. So confident that they can actually publish it in advance and nobody is smart enough to figure it out."

Tara, the ordinary people wont grasp the concept tilll its way too late. New Zealand was one of the first countries to adopt this bailin sceme back in 2013.   On the weekend I went to a family BBQ and brought this topic up in conservation.  No one there knew any thing about it and someone even disputed that I knew what I was talking about.

I have pretty much quit trying to wake people up and am just preparing to save my immediate family.

tarabel's picture



I hear you. In my case, it's someone who is apparently in love with his 401k stuffed full of paper assets. On the one hand, it would give me great satisfaction to see that get wiped out and then I wouldn't have to listen to it ever again. On the other hand, he will be in my back bedroom forever, if that happens.

But the idea of getting him to see the light before it is too late...

Well, I could more easily convince him of an alien invasion than a financial collapse that will render paper back into paper.

peter4805's picture

Hmmm... Guess it's time to draw down my CDN bank account.