Tuesday, June 11, 2013

Japanese Government Mandates "Cyprus" Treatment on Bank Investors in the Future Financial Crisis

Cyprus "bail-in" was such a resounding success that it has become the template for the advanced (industrialized) nations of the world who are also swimming in debt.

No national government on the planet Earth is more indebted, as percentage of GDP, than Japan's.

Theflyonthewall.com article at Yahoo Finance (6/11/2013):

Japan to adopt 'bail-ins,' force bank losses on investors if needed, Nikkei says

Japan's Financial Services Agency will enact new rules that will forced failed bank losses on investors, if needed, via a mechanism known as a "bail-in," according to The Nikkei. Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases, the report noted.

From Nikkei's Japanese subscribers-only article which I can only see the first paragraph because I already exceeded the monthly allowance for non-paying subscribers,


Financial Services Agency will introduce a new system that will harshly call to account investors in the nation's financial institutions. In a financial crisis, if the government declares a financial institution to have failed, the government will be able to cut investment capital to that institution. By having the investors shoulder part of the loss in a financial crisis, the system will reduce the burden on taxpayers. It will be the first government-led system that will impose a loss on investors.

Oh yes, it is to protect taxpayers, who are most likely also the bank depositors, i.e. "investors" who lend money to the banks.


VyseLegendaire said...

Not even the propagandists in Orwell's 1984 could come up with this type of phantasmagorical story. Nothing even remotely related to reality is conveyed in the original article. Try rubbing your glasses and look again you might just give yourself an aneurysm.

Maju said...

How do they expect to attract large savers that way? Beats me. It's probably just announcing an immediate application of the measure, because you cannot tell savers: "get your money in our bank, so we can legally steal it from you". And people with big money can usually move it around the globe to wherever they think it's safe and most profitable.

So I can only imagine that this implies an almost immediate "bail-in" in the weeks to come. Beware!

Anonymous said...

Well, guess governments with these ideas are going to have to inform potential investors of institutions with problems, BEFORE a financial crisis. Investors who purchase into weak institutions will know the risk prior to purchase. Funny thing, bet NO government wants to have that kind of reporting going on about the TRUE health of a bank.....

Maju said...

On second thought:

The details of the scheme actually resemble the most the widespread preferential shares scam of Spain, by which savers, mostly elderly workers who relied on those savings for their retirement, have been forcibly and mischievously become shareholders of banks against their will and without their knowledge in most cases (they typically relied on what their bank office director, a long-term acquaintance, even "friend", told them: a bunch of lies). Tribunals are slowly declaring such deals null but it's a very slow process. Protests are almost a daily thing and in some cases victims have taken personal revenge against the individual culprits. Yesterday for example a bank office director was stabbed several times by one of his victims, although he survived.

On the other hand, I can only imagine that large savers are already taking out their money before the actual bail-in happens. Nothing like announcing it beforehand, you know.

Anonymous said...

Japanese Government Bullshits Bullshit.

Sums up everything from past to future.

Anonymous said...

Of all the crazy things that have been said in Japan since the tsunami- this is the single most incredible.

And I suspect it will sail right over the masses.

If you live in Japan, and you have any money left - I would suggest it's time to think hard about your future...

arevamirpal::laprimavera said...

Yup, the news has gone right past the masses, thanks to the way it is written. They think "investors" of the banks only mean some shadowy, wealthy, or foreign investors who own bank shares and bonds.

If they could only read English news that tells the news for what it is - bail-in like Cyprus. But alas, all they care about English is how they learn to pronounce the words like "native speaker".

Maju, when did that scheme in Spain start?

Anonymous said...

Brilliant! The banks themselves propose to be able to issue special ('preferred') shares and bonds the will be the last in line creditors; next thing they need to do is to shove them through the throat of unknowing small investors and the job is done. Once you have this in place you can still attract large investors with higher grade securities.

The NRA, oops, no, the FSA obliges and looks the other way.


Anonymous said...

No, no, no, Beppe...

They will take the depositors and call them "investors" and grab their deposits - just like they did in Cyprus.

"Here's your 90% savings haircut Mr. and Mrs. XXXX. Oh, you say that money was meant for your retirement? We can accommodate you; we have a nice retirement job over in Fukushima. All you do is watch this water pump and make sure it runs 24 x 7. Have a nice day..."

Anonymous said...

@9:39 Uhm, in Cyprus depositors were guaranteed up to 100,000 euro, similarly to Japan, or did I miss something?
Whether the system will be able to cover for all the depositors of even one of the Japanese major banks is another story, of course. Privatization of the Post Office (banking) operations is consistent with what above..

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