The main liability item of a bank is made up of deposits in passbooks and current accounts. It's money given on loan to the bank which can be withdrawn at any time.
So a bank can operate (do its job of collecting and lending to individuals and companies) only if all depositors do not withdraw their money at the same time. Otherwise, a panic situation is created that is well described even in the cinema.
A film already seen
In fact, they are known, to everyone who has seen the film Mary Poppins, pictures of when I was little Michael Banks he didn't want to give up the twopence (his banker father Mr Banks he advised him to pay it into the bank) and his rebelliousness triggered a rush to the bank by the customers present in the hall to ask them to withdraw all their savings.
Panic situation also seen in the film by Frank Capra (of 1946) Life is wonderful. In what has been defined by’American Film Institute as one ofbest one hundred American films of all times is very evident knowledge between bankers and territory. The simplicity of the banking activity of the company is told neighborhood bank. Citizens poured in their savings, and the deposits were used to provide credit.
We're talking about Bank run that is, the rush to the bank branches of account holders who withdraw their money for fear that the bank will become insolvent.
Bank run (click here to read the Treccani definition)
The bank bailout
It is the greatest fear for the Banking/financial system: account holders withdraw their money from banks, they no longer have any to lend to companies, these abandon future projects and cut costs starting from employee layoffs.
Ecco allora che Economists, Responsible for economic policies and Supervisory authorities I'm always of the idea of protecting the Banking/financial system Why: “banks are considered the only institutions capable of providing credit and their rescue means protection of depositors and of payment system“.
In 2008 for example there was the nationalization of the bank in England Northern Rock (highly indebted and therefore exposed to fluctuations in the financial market), brought to his knees, precisely, by the bank run unleashed by its customers.
Bail-in
From 2016 public intervention is envisaged only in extraordinary circumstances to prevent the crisis of a single bank from having serious repercussions on the financial system as a whole and, in any case, after the application of BAIL-IN (literally saving internal).
It is a tool that allows the Resolution Authorities to have, upon occurrence of the termination conditions, the reduction in the value of shares and some credits or their conversion into shares, to absorb losses and recapitalize the bank sufficiently to restore adequate capitalization and maintain market confidence.
TheBail-in, It applies following a hierarchy whose logic expected, those who invest in riskier financial instruments to support before the other any losses or conversion into shares.
The order of priority is as follows:
- Shareholders;
- The holders of other equity securities;
- The other subordinated creditors;
- 1 creditor chirografari;
- Individuals and small business depositors for the amount exceeding 100 thousand Euros;
- The Fund Deposit Guarantee, contributing taxpayers instead protected.
In factdeposits up to 100 thousand euro, ie those protected by the Deposit Protection Fund, They are expressly excluded from the Bail-in.
Alex Gaetani