Legalizing Bail Ins

Jun 17

PPLI Bank Bail Ins

The European Commission has ordered Eleven EU countries to enact the Bank Recovery and Resolution Directive (BRRD) within two months or be hauled before the EU Court of Justice, according to a report from Reuters on Friday.

The countries were Bulgaria, the Czech Republic, Lithuania, Malta, Poland, Romania, Sweden, Luxembourg, the Netherlands, France and Italy.

The news has received little coverage despite the important risks and ramifications to savers throughout the EU and indeed internationally.

The rules, known as the Bank Recovery and Resolution Directive (BRRD) ostensibly aim to shield taxpayers from the fall out of another banking crisis by forcing creditors and shareholders to contribute to the rescue in a process known as "Bail-In".

This bail-in legislation which is being driven by the BIS through the Bank of England, ECB, Federal Reserve and Federal Deposit Insurance Corporation (FDIC) appears designed to protect banks by allowing them to confiscate deposits to prop them up rather than the noble stated objective - "to shield taxpayers".

Those who hold deposits in our banks are also taxpayers and have already paid tax in order to earn the money that is on deposit.

Central banks claim to be attempting to avert deflation with QE and negative interest rates and not simply bailing out and aiding overly indebted banks.

However, the bail-in of deposits would again place the interests of banks over those of taxpayers and depositors. It would be very deflationary and could be the tipping point which pushes economies into a recession and depression.

Cyprus created a precedent in terms of deposit confiscation and has shown clearly that having deposits in a bank is no longer the safest way to protect capital. Bail Ins have happened before and it is apparent that they will happen again.

Private Placement Life Insurance (PPLI) has an important role to play in providing a safer alternative for longer term cash deposits for individuals and in particular pension & provident funds. It can provide a Capital Guarantee as well as a guaranteed annual return and this is available to private depositors as well as Institutions.

It is normal to insure most things that we value in life and hard earned cash should be high on the list, particularly as PPLI can be profitable, tax efficient and completely safe.

Daniel Dungate