A Banking Crisis Looms | ZeroHedge

On Sept. 28, around noon, the Bank of England stepped (back) into the gilt markets and started buying government bonds with longer maturities to stop the collapse in their value, which could have caused the financial system to become unhinged. Pension funds were faced with major margin calls, which threatened to cause a rapidly cascading run on their liabilities, as trust in their liquidity and solvency would have become questioned by a widening circle of investors and customers.

Effectively, the BOE stepped in to limit the vicious circle of margin calls faced by pension funds because of the crashing values of the gilts.

Banks are also currently being hit by heavy declines in the value of government bonds, which they use as collateral. These may easily lead to cascading losses on banks, possibly with a never-before-seen speed, size, and width.

Technically, every sum you have in the bank above the deposit insurance threshold, a limit which also may not be “carved in stone,” is threatened by the bail-ins in a banking crisis.

A Banking Crisis Looms | ZeroHedge