G 20 Summit 2014 and Concern for Future

The Group of Twenty (also known as the G-20 or G20) is an international forum for the governments
and central bank governors from 20 major economies. The members, shown highlighted on the map at
right, include 19 individual countriesArgentina, Australia, Brazil, Canada, China, France, Germany,
India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United
Kingdom, United Statesand the European Union (EU). The EU is represented by the European
Commission and by the European Central Bank.
On Sunday in Brisbane the G20 will announce that bank deposits are just part of commercial banks
capital structure, and also that they are far from the most senior portion of that structure. With deposits
then subjected to a decline in nominal value following a bank failure, it is self-evident that a bank
deposit is no longer money in the way a banknote is. If a banknote cannot be subjected to a decline in
nominal value, we need to ask whether banknotes can act as a superior store of value than bank
deposits. If that is the case, will some investors prefer banknotes to bank deposits as a form of savings?
Such a change in preference is known as a bank run.
Each country will introduce its own legislation to effect the bail-in agreed by the G20 this coming
weekend. The consultation document from the UKs Treasury lists the following bank creditors who will
rank ABOVE depositors in a failing financial institution:

Liabilities representing protected deposits (in the UK the government guarantee protects 100%
of deposits up to the value of GBP85,000)
any liability, so far as it is secured
Liabilities that the bank has by virtue of holding client assets
Liabilities arising with an original maturity of less than 7 days owed by the banks to a credit
institution or investment firm
Liabilities arising from participation in designated settlement systems
Liabilities owed to central counterparties recognized by the European Securities and Markets
Authorities on OTC derivatives, central counterparties and trade depositaries
Liabilities owed to an employee or former employee in relation to salary or other remuneration,
except variable remuneration
Liabilities owed to an employee or former employee in relation to rights under a pension
scheme, except rights to discretionary benefits
Liabilities owed to creditors arising from the provision to the bank of goods or service (other
than financial services) that are critical to the daily functioning of its operations

The above list makes it clear that deposits larger than GBP85, 000 will rank ahead of the bond holders of
banks, but they will rank above little else. Importantly, both borrowings of the banks of less than 7 days
maturity from other financial institutions and sums owed by banks in their role as counterparties to OTC
derivatives will rank above large deposits.

G20 agreement on banking regulation

will end bailouts, says Carney
Bank of England governor expected to say that deal over global regulatory framework will be reached in
Australia
Taxpayer rescues of the banking sector will be a thing of the past, the governor of the Bank of England is
expected to say on Monday before meetings to back a new deal for lenders considered too big to fail.
Mark Carney will say agreement on the last two pieces of the regulatory framework governing the
largest global banks are ready to be agreed by the G20 group of nations gathering in Australia at the end
of the week.
Speaking at a meeting of central bank officials in Basel, Switzerland, Carney will say that after four years
of debate, all the elements of the regulatory jigsaw are in place to prevent a repeat of the multibillion
pound bank bailouts that hit taxpayers in the major economies after the 2008 financial crash.
Carney heads the Financial Stability Board, the global body set up in 2009 to advise the G20 on how to
make the financial system safer. G20 leaders, including David Cameron, are meeting in Brisbane on
Saturday to discuss a range of issues, including Carneyss recommendations for cleaning up the banking
sector.
Agreements have been struck between regulators and banks over a series of rules to prevent a domino
effect rippling through the financial system when one or more large banks fail.
At the Basel meeting Carney is expected to say the 29 biggest lenders must conform to tough new rules
on the amount of loss-absorbing reserves they hold. Specifically, new debt instruments will force
investors who lend to banks to convert loans into equity.
Investors who buy derivatives of bank debts will also agree a moratorium on trading to prevent a run on
a bank.
Carney will say the G20 is in a position to agree a new standard on the total loss-absorbing capacity that
globally systemic banks must hold.
These measures will shift the burden of a bank bailout away from taxpayers to investors who own the
banks or lend them funds.

In October, Carney said the new rules will ensure globally systemic banks finally have the lossabsorbing capacity that extensive analyses show balances the benefit of greater resilience against the
higher funding costs for the banks that results from the removal of public subsidies.
(Source: http://www.theguardian.com/business/2014/nov/09/g20-deal-banking-regulation-markcarney )

My Findings
Government leaders are expected to agree in November that the worlds top banks must issue special
bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to
come to the rescue, industry and G20 officials said.
The bonds, known as gone concern loss absorption capacity or GLAC, are seen by regulators as
essential to stopping the worlds 29 biggest lenders from being too big to fail.
Theres this problem with banks that have gotten so big, thanks to government coddling and favors, that
to let them fail would endanger the government itself. Therefore, up until now, every time they almost
fail, which happens repeatedly because they are all fractional reserve banks that lend out demand
deposits, the government bails them out by raising taxes and printing, and giving the money to the
banks in what is called, colloquially, a bail out. In 2008 it was $700 billion in taxes (remember the TARP
act?) and $16 trillion in printing, 22x the taxes spent on the banks.
The problem is, relying on taxpayers to back banks is politically unpopular, so instead of having to rely
on the government to transfer tax money to banks through direct taxes and inflation, governments are
enabling the banks to steal from depositors directly without using the government as its thieving
middleman.
GLAC bonds will be backed by none other than demand deposits, in other words the money you deposit
in your checking account. You cant just invent capital out of nothing if you are not a central bank and do
not have the ability to steal through inflation. So in the event of serious financial stress, these GLAC
bonds will be on the balance sheets of banks listed as assets to pay off creditors.
Got that? Thanks to G20 governments, the biggest banks now have the ability to pay off their creditors
with the money you deposit in your checking and savings accounts by calling that money a GLAC Bond
and declaring it an asset.
Now taxpayers do not have to be robbed by government in order to pay off bankster debts. Now they
can be robbed directly by the banks themselves through GLAC bonds. Remember Cyprus in 2013? When
the Cypriot government took a percentage of everyones deposits to pay off its debt?
It just went global.