Bank Bail-In. Protecting Your Savings.
You’ve heard of a bank bail-out, now is the time to know more about bank bail-ins. Keep reading for more about bank bail-ins, what they are, what it means for you, and how to protect your savings to secure your future in the event of a bank bail-in.
What is a Bank Bail-In?
Much like a bank bail-out, bank bail-ins are a means to prevent a failing bank from collapsing. Bail-outs are cash injections from the government, while bail-ins are the bank’s use of the money of unsecured creditors, including depositors and bondholders, to restructure its capital so it can stay afloat.
In addition, as bondholders, the increased risk will drive yields higher and discourage bank deposits, which leads to unease among the financial market, as seen in European countries such as Cyprus.
What Does a Bail-In Mean For Me?
Now that you, as a bank depositor, are legally treated as an unsecured creditor in the largest economies in the world, it is essential to know what a bail-in means for you and what might happen if one were to take place at your financial institution.
- Your money isn’t entirely yours. Once you deposit money into the bank, you become an investor – not a saver. You are allowing the bank the opportunity to use your money in the event of a bail-in, essentially turning you into a lender.
- You’re not protected. Interest payments were created to compensate you for the risk in lending funds to the bank. However, today’s interest rates are extremely low — even zero in some instances. This means you are no longer compensated for your risk.
- Banks can stop you from accessing your money. In Cyprus, the bank announced a bank holiday. During bank holidays, withdrawals are blocked, and the bank is not in operation. Within hours, ATMs were emptied and money was transferred away in droves. Once the bank reopened, 85% of accounts had been used for the bail-in, and strict rules were put in place to control withdrawals and transfers moving forward.
How To Protect Your Savings
Most individuals believe that when they deposit money into the bank, they are entitled to it to be returned to them in full. However, this isn’t the case for bail-ins, leaving many to wonder: how do I protect my savings?
Diversify, Diversify, Diversify
One of the best ways to protect yourself from a bail-in is to diversify your savings. If all of your savings are in one bank account that is used for a bail-in, then your entire savings is gone. However, if you diversify and have your savings in many places, you can rest assured that your future is safe in a bailout event. Even though your savings might still take a hit, you will still have savings in other places to depend on.
Own Your Assets Outright
Being the sole owner of your assets puts you in complete control of them. While owning assets outright requires more cash upfront, you don’t run the risk of it being taken away from you. There are many pros and cons to owning assets outright, including certain tax benefits. However, you own full and immediate equity in whatever your asset is.
When you deposit money into the bank, do not trust and assume that it is yours to access whenever, forever. There may be a bail-in event in which you won’t be able to access your money when you need it the most. This requires due diligence on your part by keeping an eye on things so that you can withdrawal your savings before the bail-in happens.
Things to watch out for include:
- Whether your bank has large mortgage books. This is a key indicator that a bail-in can happen if the housing market crashes as it did in 2008
- Read your bank’s deposit and savings account terms and conditions carefully so that you can fully understand what they are legally able to do with your money
- Keep an eye on your bank’s financial stability
- Listen to any news that may be pertaining to your financial institution
Own Physical Gold
Owning physical gold will help stabilize your savings account. When other investments decline, the value of gold tends to go up. When the value of the dollar changes with inflation, deflation, or becomes weak due to an economic crisis — such as a bank bail-in — the demand for gold skyrockets. This makes owning physical gold the perfect solution for protecting yourself in the event of a bank bail-in. It steady, secure, and discreet.
About Priority Gold
If you are ready to invest in gold to protect your savings and secure your future, we can help. Priority Gold is one of the most trusted precious metals dealers in the United States with BBB A+ Rating, AAA Rating with Business Consumer Alliance, and 5 Stars Rating with TrustLink.
We specialize in providing precious metals investment services with Security, Liability, and Great Convenience for customers. Our team is committed to helping to streamline their precious metals purchases at a fair price, selecting the right precious metals portfolios, and meeting their important financial objectives.
We offer Free Storage for qualifying Gold & Silver IRA accounts, a fast & easy gold buying process, and smooth IRA Transfer. And gold shows up on schedule. Priority Gold guarantees the highest standards of customer service, which comes with honesty, professional conduct, and Ethical Code of Business.
For more information, visit us at prioritygold.com