Sunday, July 30, 2017

Things To Come: EU Explores Account Freezes To Prevent Runs At Failing Banks

EU explores account freezes to prevent runs at failing banks

 European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed. 
The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble. 
The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender. 
It also come amid a bitter wrangle among European countries over how to deal with troubled banks, roughly a decade after a financial crash that required the European Central Bank to print billions of euros to prevent a prolonged economic slump. 
Giving supervisors the power to temporarily block bank accounts at ailing lenders is "a feasible option," a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue. 
EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said. 
"The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge," a person familiar with German government's thinking said. 
To cover for savers' immediate financial needs, the Estonian paper, dated July 10, recommended the introduction of a mechanism that could allow depositors to withdraw "at least a limited amount of funds." 
Banks, though, say it would discourage saving. 
"We strongly believe that this would incentivize depositors to run from a bank at an early stage," Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group, said. 
The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. Approval of EU lawmakers would be required for any final decision.

The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors' powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000). 
Under the plan discussed by EU states, pay-outs could be suspended for five working days and the block could be extended to a maximum of 20 days in exceptional circumstances, the Estonian document said. 
Existing EU rules allow a two-day suspension of some payouts by failing banks, but the moratorium does not include deposits.
The Commission, which declined to comment on the discussion, had previously excluded insured deposits from the scope of the moratorium tool fearing it "may have a negative impact on market confidence," according to a press release published in November. 
Many states supported a suspension of payouts only during the so-called resolution of a failing bank - the process which imposes losses on lenders' investors and possibly also uninsured depositors, while preserving the continuity of the banking activities, the document said. 
Most countries opposed bolder plans for an early moratorium.

Venezuelan President Nicolas Maduro asked for global acceptance on Sunday as he cast an unusual pre-dawn vote for an all-powerful constitutional assembly that his opponents fear he'll use to replace his country's democracy with a single-party authoritarian system.
Accompanied by close advisers and state media, Maduro voted at 6:05 a.m. local time, far earlier and less publicly than in previous elections. The run-up to the vote has been marked by months of clashes between protesters and the government, including the fatal shooting of a 61-year-old nurse by men accused of being pro-government paramilitaries during a protest at a church a few hundred feet from the school where Maduro voted.
Maduro and his socialist administration deny links to violent paramilitaries and say the political opposition is responsible for the violence that has left at least 113 dead and nearly 2000 wounded in four months of protests.

The Trump administration has imposed successive rounds of sanctions on high-ranking members of Maduro's administration, with the support of countries including Mexico, Colombia and Panama. Vice President Mike Pence promised on Friday that the U.S. would take "strong and swift economic actions" if the vote went ahead. He didn't say whether the U.S. would sanction Venezuelan oil imports, a measure with the potential to undermine Maduro but cause an even deeper humanitarian crisis here.
The special assembly being selected Sunday will have powers to rewrite the country's 1999 constitution but will also have powers above and beyond other state institutions, including the opposition-controlled congress.

While opinion polls say a vast majority oppose him, Maduro made clear in a televised address Saturday evening that he intends to use the assembly to govern without limitation, describing the vote as "the election of a power that's above and beyond every other. It's the super power!"
He said he wants the assembly to strip opposition legislators of their constitutional immunity from prosecution and jail at least one — Freddy Guevara, a hard-line opposition leader and one the highest-profile organizers of four months of protests against the government.
"This little Hitler has his cell guaranteed!" Maduro shouted, using his frequent nickname for Guevara.
The opposition is boycotting Sunday's vote, contending the election has been structured to ensure Maduro's socialist party continues to dominate. So all 5,500 candidates for the 545 seats in the constituent assembly are his supporters.

The vote's success will be measured by turnout, with the opposition urging Venezuelans to stay and the government encouraging participation with tactics that include threats to state workers' jobs and social benefits like subsidized food for the poor.

Maduro indicated he is eager to prosecute many more members of the opposition parties that control a handful of state governments along with the National Assembly, providing one of the few remaining checks on the power of the socialist party that has ruled this OPEC nation for nearly two decades.
"The right wing already has its prison cell waiting," the president said. "All the criminals will go to prison for the crimes they've committed."
Saying the assembly will begin to govern within a week, Maduro said its first task in rewriting the constitution will be "a total transformation" of the office of Venezuela's chief prosecutor, a former government loyalist who has become the highest-ranking official to publicly split from the president.

"A new stage in the democratic struggle starts tomorrow," Julio Borges, the president of the National Assembly, said at a news conference called by Democratic Unity, a coalition of some 20 opposition groups. "This new stage will need more courage ... street protests will get stronger."

Opinion polls say more than 70 percent of the country is opposed to Sunday's vote. But as many as half of all Venezuelans support neither the government nor the opposition — a phenomenon evident in the glum paralysis that has gripped much of the country as protesters and police wage nightly battles.

No comments: