BRRB rules and Banking Act 2016 BofE resolution and bail-in

BRRD, BofE, bank failure resolution, bail-in rule, FSCS, and bank savings deposits.

I am new to moneysavingexpert.com forums. Is there a forum here on banking law? Posting here in the Savings and Investments forum is the nearest I could find appropiate for this post. Well here goes... opening a can of worms! Oh, and just to let you grammarians out there know, I am not fond of paragraphs, nor short sentences!

How do the EU's Bank Resolution and Recovery Directive (BRRD) bank regulations and the implementing Banking Act 2016 legally affect UK bank savings deposits in practise in applying the new bail-in rule by the resolution authority, the Bank of England, PRA, in the event of a failing FCA regulated major UK bank or financial institution?

The rules state that bail-in replaces, or at least has priority to, government bank bail-out in the UK. The BRRD rules stemming from the 2007-8 financial crisis, became law in the UK on 1st January 2016 under the 2016 Banking Act. The BRRD is law in most EU and the Anglosphere countries, U.S.A., Canada, etc.

It is practically impossible for bank depositors to interface with the administration, legal etc. departments of the bank head office to get legal advice on how this implementation affects them and their deposit acounts. Account holders can only contact the consumer bank account interfaces, but operators cannot give legal advice and cannot pass the consumer request on to the registered bank admin head office to address. So to save you and their time in my opinion based on experience don't bother phoning or emailing or visiting your bank to ask about bail-ins in relationship to the risk to your bank acount savings and current account deposits. They are not legally trained and many have not even heard of the word bail-in. The actual registered admin. head office appears to be out of bounds by telephone and email to the public. All major banks have adopted this separatist structure between consumer retail banking interface and head office bank administration.

In my experience, so I am saving you the trouble, the head bank account administration consumer offices of all the banks suggest the same thing, and that is to contact FSCS and FCA. However, the bail-in rules do not appear to be within their remit. The Bank of England (BofE) and its regulatory arm the Prudential Regulatory Authority (PRA) you would think the best bet as they were involved in the drawing up of the BRRD rules and the BofE and PRA applies and overseee the application of the BRRD rescue toolkit to the failing bank. Think again. Very difficult to speak to departments at the Bank of England on this subject by phone, especially if you are not a company. Not received a reply by email yet to my enquiry,

The BofE refers bail-in enquiries to a pdf file bail-in, an introduction. This is an economics science paper and not a financial document in my opinion, so it is not so clear in the financial explanations and consequences for consumers in relation to my writing. So......, having an advantage of having professional qualifications and experience in law, but not banking law, I have had to check out the legal effects on my dosh in the banks myself. So far I am deeply concerned.

The bail-in rule allows the resolution authority, BofE and PRA, to change all deposits, over the FSCS limit on protected accounts, into shares in the bank to recapitalise the bank and pay off the liabilities of the failing bank. (Large banks, building societies, financial institutions have been given until 2022 to recapitalise at 6.95% level, smaller institutions at their existing level.)

Losing all your money above the FSCS protected amount is bad but the problem for the depositor, an unsecured creditor, is, I may be wrong here, that there is a backdoor in the legislation that states the resolution authority can bail-in all of the funds in the deposit accounts ie. convert them into unprotected shares in the bank to recapitalise the bank. In my dictionary all means all. Legal legislation is full of backdoors where one thing is said and somewhere else the opposite is said, giving the best of both worlds. They are termed: exceptons to the rule. In my opinion, they can be used as a way of getting round obstructions to what you want to do or accomplish.

Remember the aim of the BRRD rules is to not bail-out banks using taxpayer monies, but to make the depositors and shareholders pay. So they are going to apply those rules in a way to achieve that goal. Shareholders, fair enough, but savings depositors? Why should we, the depositors, with a paltry level of interest, and a contractually agreed level of deposit risk, lose all our deposits to recapitalise a reckless banking industry which is still now years after the 2007-8 financial crisis having subprime investments and trillions in highly risky derivatives which Warren Buffet, arguably the greatest investor in the world, called weapons of financial mass destruction.

The effect of this uncertainty relating to the application of the BRRD regulations can be catastrophic on a saver. Correct me if I am wrong, in the application of the bail-in rule by the Bank of England, the FSCS protection may no longer apply to funds below let alone above the limit in the case of the next UK failing bank, and the Icelandic Bank Iceserve failure case concluded that FSCS does not apply to systemic banking failure anyway. All of a depositors savings could be affected.

Most savers are not wealthy. They often need immediate access to their deposits which the bank has contractually agreed to do. Surely the bank also has a contractual liability, a legal responsibility to inform customers of new info which could impact their risk level. (See Principles in FCA Handbook on FCA website.) Yet UK banks were given the year before 1st January 2016 to implement the rules. Have they told us about this and how it could change our risk free accounts into highly risky accounts? Most wealth is not kept in banks. In this bail-in situation the wealthy will benefit at the expense of savers who rely on instant access to the interest and capital for daily living. Why do you think there is this mad rush by banks to get you into fixed term savings. How will u get your money out then even if you know your bank is about to become insolvent?

Come to think about it, from another perspective, the BRRD regulations are brilliant. The governments are trying to create a state free, taxpayer free, or partially taxpayer free, solution to prevent financial institution insolvency in which case the unsecured creditors would lose any unprotected savings anyway. Although, looking from the consumer point of view, the taxpayer is also the deposit account holder. So it is a double whammy! There are always winners and losers. Be thankful you don't live in Albania or Bulgaria where your chance of recovering money in a failed bank is zero for account holders, unless your "in the know!"

Personally, I think banks should be public not private. Public banks in the past have generally worked very well for consumers. There is greater responsibility, disclosure, accountability, transparency, honesty and less risk, recklessness, greed, and herd mentality.

Well this here be my opinion and request for further light and clarification on the issues considered. I may be wrong....