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“The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada,” said one letter to the Financial Post. “I am not joking.”

Experts say that is the last thing Ottawa wants.

No one “should be drawing parallels between Cyprus and any other country,” said Craig Alexander, chief economist at Toronto-Dominion Bank.

Kathleen Perchaluk, a spokeswoman for Finance Minister Jim Flaherty, confirmed in an emailed statement that “the bail-in scenario described in the budget has nothing to do with depositors’ accounts and they will in no way be used here.”

The banks in Cyprus are unusual because they are almost entirely funded by their depositors with negligible debt issuance. When they got into trouble and the government couldn’t afford to bail them out, the depositors were left holding the bag.

Because Canadian banks have numerous layers of debt on their balance sheets that could in the event things turn bad be converted to equity, depositors are very well protected. (Not to mention government-backed deposit insurance.)

The question is, which layers would become capital and in what order?

According to one senior fixed-income analyst, Ottawa has its eye on senior unsecured debt issued by banks. Popular with institutional fixed-income investors, the product is widely traded and makes up a big chunk of the domestic bond market.

So far it’s only a proposal in the budget and a vaguely worded one at that, but “everyone is taking the government at their word and hence the market is coming to terms with whether or not to buy it and at what price,” said the analyst, who asked not to be named.