* In the examples just provided, if an uninsured depositor
or other short-term creditor of an operating subsidiary knew--really knew-that the holding company would have to lose $340-$350 billion before the short-term creditor could sustain any loss, shouldn't that substantially eliminate the incentive to run except in cataclysmic circumstances?
One bond trader said: "If you're an uninsured depositor
at a bank in Spain you wouldn't be too happy about this."
Immediate and full payment of insured and uninsured depositor
claims has both advantages and disadvantages.
The Board believes, however, that an explicit policy that requires imposition of uninsured depositor
loss--no matter how small--is likely to increase the risk of depositor runs and to exacerbate the depositor response to rumors.
If, in fact, proposals that rely on uninsured depositor
discipline, risk-based premiums, and structural changes in the delivery of bank services raise significant difficulties, reform should then look to other ways to curb banks' risk appetites, and to limit the likelihood that the deposit insurance fund, and possibly the taxpayer, will be called on to protect depositors.
Proceeds from the sale of closed banks' properties are added to the pool of funds of these banks for distribution to creditors and uninsured depositors
in accordance with the rules on concurrence and preference of credits.
PDIC continues to hold various asset disposal initiatives such as biddings, auctions and negotiated sale to beef up the pool of liquid assets of these banks for distribution to uninsured depositors
and other creditors in accordance with the rules on concurrence and preference of credits.
As an example, if we take the case of BoC, the bank recapitalized in 2013 by the money from the uninsured depositors
and then again in 2014 (with extra e1/41bn of capital from foreign investors) and by now even the new shareholders suffer a 70% reduction of their investment (let alone the uninsured depositors
that were diluted back in 2014)!
Azerbaijan Deposit Insurance Fund (ADIF) will start payment of compensations to the last remaining uninsured depositors
of Azerbaijan's GanjaBank OJSC on April 15,Trendreports April 8 with reference to the ADIF.
In the end, the burden of the bail-in was shouldered by the uninsured depositors
of Laiki that lost all deposits over e1/4100,000 and those of Bank of Cyprus that lost almost half of them.
will thus improve their chances of recovery from the assets of closed banks, since their claims will be settled ahead of other ordinary creditors.