Open Bank Resolution in New Zealand

Has New Zealand Been a "Test Case" for Depositor Haircut Scheme? Short Answer: "Looks Likely"

Gold Survival Guide,

10 April, 2013

Last week we asked the question "Has New Zealand Been a "Test Case" for Depositor Haircut Scheme?"

This week on King World News Jim Sinclair said:

Sinclair: "How in the world can Lagarde say that Cyprus is a one-off?  The spreading of bail-in being written into Canadian law, New Zealand law, as well as in other countries, tends to indicate that what has been done in Cyprus is in fact a test case for further application.  If it wasn't, it was an economic act of war by Europe against Russia.

Eric KIng:  "Jim, when you see that being written into law in countries elsewhere, they are not setting that up for no reason."

Sinclair:  "No.  They are not writing that in because some junior clerk supports the approach.  When countries write things into legal documents it passes legal review.  So the possibility of that being a mistake is nil...."

Source. 

So Jim reckons Cyprus was a test case - well maybe for actually taking a haircut but just like Sir Ed and Everest, New Zealand got there first! Well, to continue the metaphor, at least we were the first ones to build the barbershop, even if we weren't the first ones to actually give a haircut!

This morning from Jim Sinclair's JSMineset.com, comes more evidence that this depositor funded model has been looked at on a widespread basis from as far back as March 2010. 

A document from the Bank for International Settlements (BIS), signed by over 20 institutions including various major Central Banks such as those of England, Germany, France, Switzerland and the US Fed. It clearly shows that taxpayer funded bailouts are not the recommended course of action in the case of bank failures, but rather "Losses should be allocated among shareholders and other creditors, where possible; and private sector resolutions rather than public ownership should be facilitated."

"Hi Jim,

Why does everyone seem to think that Canada, Cyprus and New Zealand are the only countries preparing for bail-ins?

CIGA Janice

Basel Committee on Banking Supervision 

Report and Recommendations of the Cross-border Bank Resolution Group

Click here to read the full report...    

This is the policy that the central banks are following. Check out the list of central banks consulted on the formulation of this - last page. The Fed is represented, so it should not have come as a surprise to Mr B. or was it the tilt of the cards that provoked the "angry" reaction?

Underlining is mine in the below quote.

Recommendation 10

National authorities should adopt crisis management and resolution strategies that reduce moral hazard by minimising public expenditures. Losses should be allocated among shareholders and other creditors, where possible; and private sector resolutions rather than public ownership should be facilitated....   

 

Dear Janice,

The backpedalling and denials which have emanated from just the same bodies that signed on to this Cyprus template is because it was used in Cyprus, revealing its existence ahead of time. This was constructed for the next large banking problem and not for slamming an island tax shelter like Cyprus. Here is the undeniable template to confiscate deposits with legal grounds. Clearly if this was expected by any public, few would carry large balances in any bank. This should answer clearly the question, can central planners do really stupid things at just the wrong time and wrong targets?

Respecfully,

Jim

Source.

Funnily enough this same BIS document is referenced at the very end of a RBNZ paper from 2011 on the Open Bank Resolution (OBR). 

So it would add weight to the speculation that maybe NZ was put forward as a guinea pig to see if the public reacted to the idea of a haircut? We got EFT-POS first so why not a bank haircut too?!! And maybe as Jim Sinclair has theorised above, Cyprus let the cat out of the bag faster than intended.