EU Proposes Freezing Bank Accounts to Bailout Megabanks

By Claire Bernish

After nervous customers panicked and drained their accounts, ultimately causing the collapse of Spanish bank, Banco Popular, equally jittery European Union officials are debating the merits of freezing access — preventing anyone from withdrawing any money — at the first sign of a bank run.

Proponents claim measures to halt a rush of withdrawals would prevent the downfall of floundering financial institutions at their most vulnerable point — in hopes of staving off a catastrophe at least as harrowing as that of 2008 — while detractors admonish the move might have precisely the opposite effect, with investors rushing to yank funds at the slightest indication of trouble.

“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’ told Reuters.

“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,” Reuters reports.

“EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said.”

A cursory autopsy of last month’s Banco Popular failure had economic officials scrambling to figure out how best to prevent a similar financial debacle; but the idea of cutting customers’ access to their own funds when conditions warrant, blasts apart a Pandora’s Box of potentialities — all, favoring the State and banking industry over individual customers.

While officials contend cutting off account access would theoretically prevent a bank already in distress from going under, when scores of people withdraw money at once, the proposal toes a fraught but sacrosanct line blocking government overreach from private, individual finance.

According to the Estonian paper perused by Reuters, an additional measure proposed the development of a mechanism whereby customers in such a situation could withdraw “at least a limited amount of funds.”

“We strongly believe that this would incentivize depositors to run from a bank at an early stage,” Charlie Bannister of the banking lobby group, Association for Financial Markets in Europe (AFME), told Reuters, alluding to the possible whiplash effect described above.

Envoys of the European Union originally discussed these withdrawal restrictions on July 13, with further talks set for September, but lawmakers would have to concur before any variant of the plan could be put in place. Continues Reuters:

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.

In fact, only just now have insured deposits debuted as a target for the withdrawal moratorium, as authorities previously felt such a move “may have a negative impact on market confidence.”

Nevertheless, economic and banking troubles have hit several European nations in recent years, such as the Cyprus fiasco, as described by Bitcoinist,

Back in 2013, Cyprus’ banking crisis was a hair’s breadth away from a total economic collapse. Cypriot banks were desperate for a bailout from the EU and IMF and many account holders feared that their deposits would vanish. This fear caused a classic bank run and people were rushing to banks and ATMs in order to withdraw as much money as they could.

Inevitably, cash became scarce and the ATMs stopped working. Many saw Bitcoin as the last option to secure their funds.

With severely curtailed faith in Western and central banking institutions, that European Union insiders would look first to penalize customers for a bank’s poor planning and management in the midst of a theoretical future crisis typifies the impetus for throngs of people riding the tumultuous cryptocurrency wave as far away from Big Banks as possible.

Considering officials now hope to revoke access to bank accounts at perhaps the time customers would most need it, the marriage of State and finance obviates how insignificant the needs of the so-called little guy when the government sees only green.

Claire Bernish began writing as an independent, investigative journalist in 2015, with works published and republished around the world. Not one to hold back, Claire’s particular areas of interest include U.S. foreign policy, analysis of international affairs, and everything pertaining to transparency and thwarting censorship. To keep up with the latest uncensored news, follow her on Facebook or Twitter: @Subversive_Pen. This article first appeared at The Free Thought Project.


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8 Comments on "EU Proposes Freezing Bank Accounts to Bailout Megabanks"

  1. What does that even mean?

  2. As I have said so many times, Banks are a ponzi scheme when the ponzi starts to fail they will take your money and hard assets

    • Free Man (NOT) | July 31, 2017 at 3:48 pm | Reply

      Money? Yes, unless you get there before they close the doors. Maybe.
      .
      Hard assets? Not if they aren’t in the bank. And of course they shouldn’t be.

  3. John Woodhead | July 31, 2017 at 3:40 pm | Reply

    Ponzi scheme is in my opinion 100% correct and as history shows only one thing in the end happens to ponzi schemes

  4. Sylvan Peckerwood | July 31, 2017 at 4:18 pm | Reply

    And soon you will have all your money and other assets online, so that they can just take whatever they like whenever they like.

    Bank needed $500 million extra that day? $5 deducted from your checking, gone, nothing you can do about it and it’s not coming back again, ever. Your contribution to making the world financial systems sustainable.

    The American Red Cross is a bit bummed over falling donations after they have once again been exposed. The banks take $10 out of your checking for them. You can get it back, eventually but you have to jump through hoops.

    You are having friends and their families over for a huge BBQ this weekend. You try to buy $600 worth of steaks, sausages and ground beef. At the cash register your card is declined. Talking to the bank on the phone you learn that you have no business spending so much money at the grocery store. The conversation ends with the bank agent allowing you a single one-time $350 transaction, but not without reminding you, you can only have two more of these the next 12 months.

    Right after you come in, your boss asks you into a conference room. As you walk into the room you notice the HR lady sitting there. You get fired. Your boss keeps going on about lack of performance. You leave the building wondering what really got you fired. It turns out your bank was reporting all your account activity to a company in Nevada. They aggregate your credit report, your spending and purchases, medical history, criminal history, DMV records, facebook and other social media, travel history, and many, many other sources of data into a score. A score of just how good an employee you can be. Your score wasn’t passing, maybe you should not have paid with your card at the marijuana store.

  5. That way when they fail they can take your money with them…

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