This is a  fascinating interview that explores what happened in Cyprus, and some of the resulting conclusions that we can draw.

It all started with the banking crisis in Cyprus.

Following the economic crisis of 2008, we witnessed a steady stream of bail-outs to keep companies - or even countries -  afloat. Governments stepped in with tax payer dollars to provide the required cash.

Today the concept of "bail-ins" is gaining traction throughout the world. Essentially this means that governments are no longer willing to provide all the funds necessary to keep a financial institution afloat. Banks, for example, can now be pressed to seize a portion of the uninsured bank deposits from their own customers.

This is not simply a one-off incident that occurred in remote Cyprus. The framework for a bail-in regime was written into our Canadian federal budget in 2013.

Though it is unlikely that we will see a similar banking crisis occur in Canada, we still need to be aware of the implications of this new approach.

2 Comments