Focus turns to FDIC-protected deposits
Greece announced it intends to take drastic measures to obtain the social security contributions owed by commercial enterprises in the country, without having to slash pensions and benefits.
The announcement by the Labor and Social Insurance Ministry has raised the question for Americans: Are your bank deposits in a Federal Deposit Insurance Corporation-protected financial institution safe from confiscation ?
Though little noticed at the time it was issued, a 15-page paper jointly issued Dec. 10, 2012, by the FDIC in the United States and by the Bank of England, titled “Resolving Globally Active, Systematically Important, Financial Institutions,” makes clear bank deposits can be confiscated by a bank defined as a “globally active, systematically important, financial institution,” or G-SIFI. The deposits can be seized if the depositors receive equity in the form of bank stock in one or more of the newly reformed operating entities after a bank failing economically is resolved or restructured.
That means the type of assets confiscations witnessed today in the Eurozone can happen in the United States. Bank deposits, even in a FDIC-protected bank, are subject to confiscation provided the crisis involves a G-SIFI and the depositor is given bank stock of one form or another once the financial institution under consideration has been restructured.
In Greece, the labor ministry is planning to force corporations operating in the country to pay up to a total of 14 billion euros of pension contributions due or face having their assets held in banks confiscated by the government. The amount is equal to 8 percent of Greece’s Gross Domestic Product, or GDP.
Greece’s fiscal gap expected at the end of 2013 from social security is expected to equal at best 1.06 billion euros, with next year’s government budget requiring a 1.8 billion euro reduction in state subsidies to social security funds.