Bailin and Central bank digital currency: Difference between pages

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'''1. Statutory bailin'''
(CBDC).


A technique used as part of the resolution of a failed bank under statutory authority.  
A CBDC is a digital currency issued and administered by a central bank.


The Resolution Authority (RA) makes an assessment of the extent of expected losses and reconstructs the bank's capital accordingly.
For example, the Bahamanian Sand Dollar.


In reconstructing the bank's capital the RA imposes losses on creditors, including preferred shareholders and depositors. 


The allocation of the total expected losses follows the creditor hierarchy that would apply in a liquidation, until the total expected losses are covered.
Important potential benefits of CBDCs include:
* Speed
* Transparency
* Reduced costs
* More efficient cross-border remittances


The remaining (surviving) layers of debt are partially converted to equity to recapitalise viable parts of the business.


The viable parts of the business are thus enabled to continue under new ownership.
:<span style="color:#4B0082">'''''CBDC should anchor monetary stability & complement private sector activities'''''</span>


:"In a recent presentation by Fabio Panetta (member of the Executive Board of the ECB), at the Annual Congress of the European Economic Association, he noted:


The RA is normally given significant discretion in how the reconstruction - including bailin - is applied.
:o    Digital public money is the monetary anchor in a digital world.
:o    The importance of safeguarding monetary sovereignty.
:o    The need to enhance competition and efficiency in payments.




:But also the importance that a CBDC was not too successful if it crowds out private sector activity."


'''2. Contractual bailin'''
:''ACT blog - Naresh Aggarwal - Central Bank Digital Currencies (CBDCs) and other digital currencies – September 2022.''
Contractual bailin refers to a provision in the terms of certain bank debt that are to be converted automatically to equity or written off, if conditions specified in the contract obtain.




Sometimes written ''bail-in'' or ''bail in''.
:<span style="color:#4B0082">'''''Bank of England considering CBDC'''''</span>
 
:"A Central Bank Digital Currency (CBDC) [in the UK] would allow households and businesses to directly make electronic payments using money issued by the Bank of England.
 
:We have not yet made a decision on whether to introduce CBDC.
 
:The Bank [of England] provides physical money in the form of banknotes, which can be used by households and businesses to make payments.
 
:We also provide electronic money, but this can only be used by banks and selected financial institutions.
 
 
:A Central Bank Digital Currency would make electronic money, issued by the Bank of England, available to all households and businesses.
 
:This would allow everyone to make electronic payments in central bank money.
 
:... CBDC is sometimes thought of as equivalent to a digital banknote, although in some respects it may have as much in common with a bank deposit.
 
:Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits."
 
:''Bank of England - 2020.''
 
 
:<span style="color:#4B0082">'''''Improving cross-border payments'''''</span>
 
:"Many central banks are researching CBDC, and there are clear opportunities for CBDCs to improve cross-border payments and protect monetary sovereignty."
 
:''Bank for International Settlements, Paper 115 - March 2021''.
 
 
:<span style="color:#4B0082">'''''Supporting new technologies'''''</span>
 
:"The introduction of a [UK] Central Bank Digital Currency would be a significant development which could help support the adoption of new technologies (e.g. blockchain) in financial services.
 
:There is concern that retail CBDC could lead to increased data being held on the consumer. One option would be to follow the proof of concept developed by the European System of Central Banks, which explored allowing users to remain anonymous for low value transactions, but still maintaining AML/CTF checks for larger transactions, and ensuring that identity and transaction history were not available to central banks or the intermediaries."
 
:''Kalifa Review of UK Fintech - February 2021''.
 




== See also ==
== See also ==
* [[Loss absorbing capacity]]
* [[Account]]
* [[Resolution Authority]]
* [[Altcoin]]
* [[Multiple Point of Entry]]
* [[Anti money laundering]] (AML)
* [[Single Point of Entry]]
* [[Bank of England]]
*[[SLAC]]
* [[Bank for International Settlements]]
* [[Cash in the new post-crisis world]]
* [[Bitcoin]]
* [[Bailout]]
* [[Blockchain]]
* [[Britcoin]]
* [[Central bank]]
* [[Central bank money]]
* [[Commercial bank money]]
* [[Countering terrorist financing]] (CTF)
* [[Crypto-assets]]
* [[Cryptocurrency]]
* [[Cryptography]]
* [[Currency]]
* [[Deposit]]
* [[Digital currency]]
* [[Digital euro]]
* [[Digital public money]]
* [[Distributed ledger]]
* [[e-krona]]
* [[e-money]]
* [[Ether]]
* [[European System of Central Banks]]
* [[Fiat currency]]
* [[Gold standard]]
* [[Libra]]
* [[Monetary]]
* [[Money]]
* [[Multi-CBDC arrangement]]
* [[Payment Interface Provider]]  (PIP)
* [[Proof of concept]]
* [[Retail central bank digital currency]]
* [[Ripple]]
* [[Sand Dollar]]
* [[Sovereignty]]
* [[Stablecoin]]
* [[Wholesale central bank digital currency]] (wCBDC)
 
 
==External links==
* [https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220823~26022f4481.en.pdf Policy panel on central bank digital currencies - Fabio Panetta - European Central Bank - August 2022]
 
* [https://www.bankofengland.co.uk/paper/2021/new-forms-of-digital-money New forms of digital money - Bank of England - June 2021]
 
* [https://www.bankofengland.co.uk/research/digital-currencies Central bank digital currencies - Bank of England]
 
* [https://www.bis.org/about/bisih/topics/cbdc.htm Bank of International Settlements, Central Bank Digital Currency]
 
* [https://www.youtube.com/watch?app=desktop&v=srJMnI8WFRY ACT Webinar, Central Bank Digital Currencies, Overview of the Bank of England's Work, March 2021]]


[[Category:Compliance_and_audit]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_frameworks]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]
[[Category:Technology]]

Revision as of 09:42, 19 September 2022

(CBDC).

A CBDC is a digital currency issued and administered by a central bank.

For example, the Bahamanian Sand Dollar.


Important potential benefits of CBDCs include:

  • Speed
  • Transparency
  • Reduced costs
  • More efficient cross-border remittances


CBDC should anchor monetary stability & complement private sector activities
"In a recent presentation by Fabio Panetta (member of the Executive Board of the ECB), at the Annual Congress of the European Economic Association, he noted:
o Digital public money is the monetary anchor in a digital world.
o The importance of safeguarding monetary sovereignty.
o The need to enhance competition and efficiency in payments.


But also the importance that a CBDC was not too successful if it crowds out private sector activity."
ACT blog - Naresh Aggarwal - Central Bank Digital Currencies (CBDCs) and other digital currencies – September 2022.


Bank of England considering CBDC
"A Central Bank Digital Currency (CBDC) [in the UK] would allow households and businesses to directly make electronic payments using money issued by the Bank of England.
We have not yet made a decision on whether to introduce CBDC.
The Bank [of England] provides physical money in the form of banknotes, which can be used by households and businesses to make payments.
We also provide electronic money, but this can only be used by banks and selected financial institutions.


A Central Bank Digital Currency would make electronic money, issued by the Bank of England, available to all households and businesses.
This would allow everyone to make electronic payments in central bank money.
... CBDC is sometimes thought of as equivalent to a digital banknote, although in some respects it may have as much in common with a bank deposit.
Any CBDC would be introduced alongside – rather than replacing – cash and bank deposits."
Bank of England - 2020.


Improving cross-border payments
"Many central banks are researching CBDC, and there are clear opportunities for CBDCs to improve cross-border payments and protect monetary sovereignty."
Bank for International Settlements, Paper 115 - March 2021.


Supporting new technologies
"The introduction of a [UK] Central Bank Digital Currency would be a significant development which could help support the adoption of new technologies (e.g. blockchain) in financial services.
There is concern that retail CBDC could lead to increased data being held on the consumer. One option would be to follow the proof of concept developed by the European System of Central Banks, which explored allowing users to remain anonymous for low value transactions, but still maintaining AML/CTF checks for larger transactions, and ensuring that identity and transaction history were not available to central banks or the intermediaries."
Kalifa Review of UK Fintech - February 2021.


See also


External links

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