BankCAMELS has no legal expertise and we don't offer any legal opinions. According to an article from GSIexchange, however, customers and depositors who are storing assets in a bank are “creditors” who can immediately be regarded as legitimate bank “shareholders". This means that a large portion of their stored funds can be converted into bank equity. To be clear, depositor funds and assets can be legally confiscated by the bank to maintain its solvency.
"This places your cash, savings and checking accounts, investments, and retirement accounts such as your IRA or 401(k) at considerable risk of being converted into bank equity." (Bold is original)
This being the case, it only makes it extra important for depositors to identify sound financial institutions.
Below are some similar articles:
A bail-in takes place before a bankruptcy under current regulations, regulators would have the power to impose losses on bank depositors while leaving other creditors of similar stature, such as derivatives counter-parties untouched. If your bank goes bust then your deposits/savings will be taken from you and turned into shares of the bank. You have no say in the matter because in legal terms, as a bank depositor, you are just an unsecured creditor of the bank."
"Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.
Why does it matter? Because if the bank’s IOUs are converted to bank stock, they will no longer be subject to insurance protection by the FDIC, but will be 'at risk' and vulnerable to being wiped out, just as the Lehman Brothers shareholders were in 2008."