By Patrick A. Heller

Commentary on Precious Metals Prepared for CoinWeek.com….



Are you one of the people who still have funds in a Canadian bank account? Many Michigan residents, where I live, have such accounts because of the proximity of the Canadian border.

Well, if you are unlucky enough to be one of them, make sure you understand what is included in the Canadian government’s 2013 budget. You can access the full budget online at http://www.budget.gc.ca/2013/home-accueil-eng.html.

Pay attention to the fine print. On page 144 it reads, “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.” It gets worse on page 145, where it reads, “The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.”

The English translation of quote “the very rapid conversion of certain bank liabilities into regulatory capital” unquote means that if any major Canadian bank is failing it will take funds out of its customers’ checking and savings accounts and use those funds to bail out the shareholders of the bank. The budget does not give a nuts and bolts guideline as to which accounts will be affected or by how much. But the key guarantee is that at least some accounts will have at least some of the funds confiscated.

In the latest version of the Cyprus bailout agreement, customers with bank account balances below 100,000 euros, which is approximately $130,000, were largely unaffected. Unfortunately, Cypriot bank balances above 100,000 euros saw as much as 40% of the account balance confiscated. Canada might or might not adopt a similar seizure program.

Last week Eurozone officials admitted that confiscating funds from checking and savings accounts held by customers of faltering banks will be a standard part of any future bailouts. Canada is now about the twentieth nation to adopt the plan of confiscating bank account balances of customers of poorly managed large banks.

Now that you know these additional risks of leaving funds in a Canadian bank, how fast will those of you who have such accounts close them out?