Stealth Bail-ins and a Weak Market Confirmed by Dow Theory
You might think following Angela Merkel’s electoral success last month all was stable in Euroland; unfortunately, nothing could be further from the truth. I have it from reliable sources that Euros continue to flood out of Europe, so much so that Mario Draghi, the president of the European Central Bank, stated publically immediately after the German Elections that “unlimited” amounts of “money” will be available to support the Euro.
However, more worryingly, the specter of being “Cyprused” continues to haunt Euro citizens. Every month the “bail-in” model, placed into law during the Irish presidency, becomes the option of choice to save troubled banks. This phenomenon is not being widely reported yet its use is utterly destroying the faith ordinary Europeans have in their banks. General banking liquidity levels have become so low in England that the policy has now seeped into the sterling area. As reported by The Telegraph last week:
“Bail-in of Sterling Banking System Officially Begins As UK’s Co-Operative Bank to Bail-in £1.5bn With 100% Losses!”
“In the wake of the Cyprus Popular Bank’s depositor bail-in, we alerted Telegraph readers on April 2nd to the fact that bail-ins were coming to the US and UK, as The Fed and BOE had quietly created a resolution authority for unlimited bail-ins for TBTF banks.
Less than 3 months later, the bail-in of the western banking system has officially begun, as the UK’s Co-Operative Bank is seeking a £1.5bn bail-in recapitalization with junior bond holders and investors (including pension funds) facing a complete-100% wipe-out on £370m of permanent interest bearing shares (PIBS) issued by the Co-op.
Co-operative Bank faces nationalization if junior bondholders reject ‘haircut”.
Co-operative Bank’s rescue recapitalization needs the support of £1.05bn – or around 80pc – of the holders of £1.3bn of its junior debt or the lender could end up being nationalized.
Evan Sutherland, the chief executive of the Co-operative Group, called the rescue plan “good news for The Cooperative Group, The Cooperative Bank, its customers and our members.”
He said it meant both investors and the group would make “a joint contribution” to the bank’s recapitalization, without any help from taxpayers.
However, a group of pensioners and other retail investors in the Cooperative Bank are facing massive losses under the rescue.
Astonishingly, the banksters are taking the theft to an extreme not even seen in the Cyprus bail-in: 100% losses!:
Holders of £370m of permanent interest bearing shares (PIBS) issued by the Co-op and Britannia Building Society before its takeover are expected to have their coupons cancelled, making them effectively worthless. Roughly 7,000 retail investors will be affected and the bank said that, on average, they held less than £1,000 in these bonds.
As Diesel BOOM let out of the bag a touch early, the Cyprus bail-in was indeed a template, as bond holders will be bought out with devalued or possibly worthless equity shares:
The Co-operative Group will issue a new £500m bond, paying about 6.5pc annually, to buy out the junior creditors. They will also be given equity in the group as the bank prepares to float up to 50pc of its shares on the stock market later this year. It is the first time that bondholders have been asked to take a haircut to keep a British bank afloat.
While some bond holders suffer 100% losses on the PIBS, Co-Operative Bank won’t have to sell any assets to raise capital
full article at source :http://www.financialsense.com/contributors/christopher-quigley/stealth-bail-ins-weak-market-confirmed-by-dow-theory
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