Hold "Physical Cash,” “Including Gold and Silver” To Protect Against "Systemic Risk" - Fidelity

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- Hold physical cash “including gold and silver” says manager in one of largest mutual fund and financial services groups in the world

- "Systemic risk" threat to deposits says respected Fidelity  fund manager

- Record global debt unlikely to be sustained by higher interest rates

- Banks may not be prepared for "shock" of defaults

- Guarantees to depositors unlikely to be honoured

- Savers and investors should hold “physical currencies” “including precious metals”

A fund manager for one of the largest mutual fund and investment groups in the world, Fidelity, has warned investors and savers to have an allocation to “physical cash,” “including  precious metals” to protect against "systemic risk".

The EU and other supra-national institutions have been agreeing the architecture for bail-ins in recent years.  Just this month, at the start of June, the European Commission has ordered 11 EU countries to enact the Bank Recovery and Resolution Directive (BRRD) within two months or be hauled before the EU Court of Justice.

11 countries are under pressure from the EC and had yet “to fall in line”. The countries were Bulgaria, the Czech Republic, Lithuania, Malta, Poland, Romania, Sweden, Luxembourg, the Netherlands, France and Italy.

The new bail-in system is largely in place and emergency resolutions can be brought forward in the event of banks failing in the interim period. The "bail-in" will require that shareholders, bondholders and importantly now depositors will all suffer ‘haircuts’ or be burnt if a financial institution is in trouble.

The European parliament confirmed that depositors with more than 100,000 euros ($137,000) would be bailed in after shareholders and bondholders. It is important to note that the 100,000  figure is an arbitrary figure and there is a possibility that this figure could be reduced by an insolvent government faced with an imploding banking system.

To deal with these risks Spreadbury advocates a well-diversified portfolio. Cash should be spread out in different banks. Savers should hold physical cash outside the banking system - a remarkable suggestion coming from somebody so well acquainted with the workings of the financial system.

He also suggests that investors hold gold and silver. He says that the unravelling he foresees is more likely to happen in "the next five years rather than ten".