The Globe and Mail reports in its Saturday, April 6, edition that Ottawa's plan to create a safety
net, or "bail-in" mechanism, for Canada's banks involves a new kind of investment
similar to bonds that will
be sold to large institutional
investors.
The Globe's Grant Robertson writes the plan will give
banks access to emergency capital
to keep themselves solvent
in the event of a major crisis.
Unnamed sources say the concept is designed to
prevent deposits or taxpayer
money from being used to stabilize
a bank.
In its latest budget Ottawa said it would
enact a bail-in regime in which
a failing bank would use certain
"liabilities" in order to stabilize
itself.
Since deposits are one form of
bank liability, that wording
prompted immediate comparisons
to the banking crisis in
Cyprus, where the government
ordered banks to draw upon the
accounts of large depositors for
emergency funds.
While the term "bail-in" has
been used in both cases, Canadian
officials want to distance their plan
from any that would use consumer
deposits for capital. Amid
questions about the plan, a Finance Minister
spokesman said no consumer bank
deposits would
be drawn upon in the Canadian
bail-in scenario.
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