The EU and western drive toward bail-ins continues unabated. So too does the increasing uncertainty for investors in European financial institutions and depositors in European and western banks.
The coming bail-in regime raises the spectre of the effective loss of their investments and savings due to the new legislation which will again bail out insolvent banks.
On July 8, the Austrian government had its parliamentary groups pass special legislation for a bail-in of Hypo Alpe Adria bank (HAA), in the range of nearly EUR 900 million.
The Austrian government’s legislation on bail-ins goes further than EU legislation, as it does not exempt from the bail-in the first EUR 100,000 on deposit.
The victims of the bail-in are hundreds of thousands of Austrians who bought life insurance policies.
Indeed, the insurance companies had invested in HAA bonds that will no longer be guaranteed under this legislation. Specifically, it hits the policies of civil servants (at Oesterreichische Beamten-Versicherung), of municipal workers and employees (Wiener Staedtische Versicherung) and others who bought insurance from Uniqua.
Previously, the Austrian province of Carinthia had guaranteed the bank, but incredibly the new legislation declares that guarantee to be invalid retroactively. This then invalidates the transfer of that guarantee to the Austrian state when the bank was nationalized in 2009.
The retrospective bail-in of a state guarantee in respect of subordinated debt is unprecedented in this context.
The Austrian government claims the legislation only applies to the case of the HAA, but critics have correctly warned that a dangerous case of precedence has now been set, leaving the door wide open for other expropriations and deposit confiscation.
The developments cast doubts on Marc Carney’s and Bank of England officials that bail-ins are only for large systemically important institutions.
Bail-ins are coming to financial institutions and banks in the EU, UK, U.S. and much of the western world – with painful consequences for unprepared savers.
Must read guide and research to deposit confiscation and banks that are vulnerable to deposit confiscation can be read here:
Protecting Your Savings In The Coming Bail-In Era
From Bail-Outs to Bail-Ins: Risks and Ramifications
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