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Conservative Budget Bail-in Regime May Allow Banks to Confiscate Customer's Deposits

by Dr McVety

On March 21st, 2013, Prime Minister Stephen Harper had his Finance Minister Jim Flaherty present their 2013 Budget that included a "Bail-In Regime" on page 145. "The clause will allow banks to convert liabilities into capital in times of need". The recent events in Cyprus, coupled with the G20 agreement in Mexico City-2012, suggest that this so called bail-in scheme may be used to plunder the savings of Canadians.

The bank failures of 2008 were rescued by governments doling out trillions of dollars of bail-outs.  The result was massive national debt for western countries.  International financial discussions have recently revolved around a new option for banks to simply loot the accounts of their customers.  Cyprus banks were the first to implement a "bail-in".  The Eurogroup deal on March 25th allowed the Bank of Cyprus to use 37.5 % of deposits exceeding 100,000 Euros for the initial bail-in and a further 22.5% to remain on hold.  This action caused massive runs on Cyprus banks, riots, and unrest leaving citizens screaming "you took my life savings". 

Remarkably, Prime Minister Harper has implemented a similar "bail-in regime" for Canadians:

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.  (Budget 2013 -page 145)

Reports say that Finance Minister Jim Flaherty's spokeswoman, Kathleen Perchaluk, recently emailed a statement saying 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."  Comforting words, however that is not what the budget says and I doubt Kathleen Perchaluk’s words can be taken to the bank.  However, Carney outlined a plan to establish a hierarchy of bank liabilities that would be converted into bank capital and that some types of deposits would be included, and the budget talks of converting liabilities (ie. customer deposits are bank liabilities) into capital; converting money the bank owes into funds it can use. Mr. Carney would not guarantee in his interview that depositor's money would not be affected.

In an interview this week, Mark Carney, Canada’s top financial regulator, confirmed that the bail in as a component addressing systemic financial institutions as being "absolutely necessary", and "that this is an area where the largest banks of the world are very focused." Mr. Carney offered no guarantee that depositors would not have their funds confiscated under the new bail-in regime outlined in Canada’s proposed 2013 budget.  In fact he went on to infer that customer deposits over $100,000 may not be protected.

Why would a Conservative Government even propose such a scheme?  The answer is in the numbers.  Since taking power, Prime Minister Harper’s actions have not been conservative.  He has increased government spending from $188 Billion to $253 Billion and forecasts a budget of over $300 Billion within three years.  The Prime Minister has hired 25% more federal employees and added $150 Billion to Canada's debt.  These numbers reflect the most liberal tax and spend government in Canadian history.

How did a staunch conservative become fiscally liberal?  Stephen Harper was one of the original Reform Party leaders, Preston Manning’s chief of staff and founding leader of the Conservative Party of Canada.  As an economist, he wrote his Masters Degree thesis attacking deficit spending and liberal economic policies. 

How did such a man make a dramatic about-face turn? The Prime Minister explained his road to Damascus experience during his speech on January 28, 2010 at the Davos Economic Summit:

If I may be indulged in a personal recollection, what I saw at the Washington Summit made an enormous impression on me. Nations whose interests have often been at odds, nations with different traditions of governance, rivals even former enemies, found themselves addressing common problems with a common will. In this globalized economy, they recognized that a flood engulfing one would soon swamp them all. So even though twenty some leaders, all represented sovereign states, they agreed to common, and synchronized actions to chart the same course toward calmer waters; Ideological differences were set aside, old enmities were not raised… I would say this if you had arrived from another planet; you could never have guessed which nations had spent decades mired in hostility. Now you might call it the fellowship of the lifeboat, but ladies and gentlemen in that brief parting of the veil, I saw world leadership at its best – a glimpse of a hopeful future. One where we act together for the good of all, the world we have been trying to build since 1945; the world we want for our children and grandchildren. It shows it can be done if we act together. And we call this, I call this, enlightened sovereignty.

The Prime Minister's epiphany during the "brief parting of the veil" caused him to drop all "ideological differences" and work toward the greater good of all, sounding more like Marx and Engels than John Locke.  The result is that Canada’s government is marred with massive deficit spending, debt and permanent big government.

It is so hard to believe that a man can completely change in one day, however the Prime Minister’s words are clear and the facts are the facts.  How long are we willing to suspend reality and hold on to the blissful hope that Stephen Harper will revert back to conservatism?  Are we still dreaming that soon the budget will be balanced, the debt will decrease, and we will hear the words "the days of big government are over"?

A conservative leader should never even think of implementing a “bail-in regime”.  Such a concept is fraudulent.  Canadians must demand that the Prime Minister remove this clause from the budget.   Talking points from the PMO have attempted to sooth our troubled hearts with nice words of assurance, but remember that actions speak louder than words.  The PMO and the Finance Minister’s Office are saying “The Canadian proposal means that a failing financial institution has to tap into its own special reserves or assets (which it has been forced to put aside) to keep its operations going.”  These words directly contradict the budget that refers to “rapid conversion of certain bank liabilities into regulatory capital”.  Assets are not liabilities.  Customer deposits are liabilities and they should never be turned over to the bank in a bail-in regime.

The only solution is for this clause to be expunged from the budget; if not, Canada’s banks may one day take action. There will be no warning, no appeal, and no solace… your money will simply disappear.

Sign the petition at

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Dr. Charles McVety

President, Canada Christian College



2013 Budget -

Cyprus to take 37.5% from account holders -

Kathleen Perchaluk’s statement -

Harper’s history of increased spending -

Harper’s Master’s Thesis -

Harper Davos Speech - 

Mark Carney Interview -