BANK of England Governor and chairman of the Financial Stability Board Mark Carney understands both that another major banking crash is on the way and that the working class of the world will respond to attempts to make them pay for a second major banking crisis within 10 years with socialist revolutions.
He has therefore drawn up new rules (as if there were any old rules for the banking vultures) that will force creditors, not taxpayers, to carry the losses of banks deemed ‘too big to fail’. He wants the boss class to pay for any crisis!!!
The plan emerges after mass strike movements and working class unrest throughout the world has made it crystal clear that the masses will not fork out trillions to save the bankrupt banking class and capitalism. (In the case of Britain the 2008 banking crashes cost the taxpayer £1,1tn!)
In order that the banks are able to stand on their own two feet there are to be new ‘global rules’ to force creditors to bear banks’ losses. This will ‘ensure’ that taxpayers’ money should never be used again to bail out banks says Carney.
Of course the opposite side of the equation also works. This is as soon as the word gets out that the proposition is for real, creditors will withdraw their capital, leaving the banks and their depositors to their fate. The banks meanwhile will slash their lending, and push up interest rates sky-high.
Carney is the chairman of the Switzerland-based Financial Stability Board (FSB) and governor of the Bank of England. His new rules if and when agreed will require big banks to hold much more money against losses, which Carney called a ‘watershed’.
The plan is that ‘Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved (wound down) without recourse to public subsidy and without disruption to the wider financial system,’ he said in a statement.
Under the new system, bank shareholders and lenders to banks such as bondholders would be the first in line to take the brunt of any future losses, if banks cannot pay creditors out of their own resources. Banks may also be expected to scrap dividends and rein in bonuses.
How many bankers and investors will hang around waiting for this crisis moment is questionable. Carney may well start the greatest run on the banks in history as soon as his proposals become a fact and nervous investors became panic ridden and hysterical.
The new rules are a long way off being implemented, however. They will need to go through consultation and most new rules will only take effect by 2019.
The banking class has been put on several years notice and will no doubt take what actions are necessary to protect their ill-gotten gains.
Carney must know that in the recent past, in Germany and other countries, the banking class was on the front line of organising regime changes and placing extreme right wing movements into power, to defend their assets.
From January 2019, big global banks like HSBC and Goldman Sachs will have to have an equity buffer of at least 16-20 per cent of their risk-weighted assets.
The new buffer, known as total loss absorbing capacity or TLAC, must be at least twice the leverage ratio of a bank.
This is a separate measure of capital to total assets. Some of the buffer must also be held at major overseas subsidiaries to allay fears from regulators outside the country a bank is based in.
David Ereira, a partner at the law firm Linklaters, has admitted that the new rules will not put a stop to large global banks deemed ‘too big to fail’ getting into difficulty and that a number of politically problematic details still had to be hammered out.
Bankers remain ‘unreformed’. One of the UK banks bailed out by the taxpayer was RBS, which despite also being hit by a number of other scandals, rewarded its top bankers with £500 million in bonuses last year. Such institutions will not hang about waiting like some turkey for Christmas. It will take political action!
The bankers and the bosses will never sacrifice their assets to save the capitalist system. It is their belief that the working class of the world was put on the planet by the Lord precisely to play this role!
There is only one way out of the banking crisis and the crisis of capitalism, and that is to carry out socialist revolutions that will overthrow capitalism and imperialism worldwide and replace it with a socialist society whose maxim will be ‘from each according to their ability, to each according to their need’.