Big Depositors Could Suffer in Future Bank Bailouts Under New Law

Search form

Big Depositors Could Suffer in Future Bank Bailouts Under New Law

Big Depositors Could Suffer in Future Bank Bailouts Under New Law
Mon, 4/8/2013 - by Jussi Rosendahl
This article originally appeared on Reuters

Big bank depositors could take a hit under planned European Union law if a bank fails, the EU's economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus's bailout model was exceptional.

"Cyprus was a special case...but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down," Rehn, the European Economic and Monetary Affairs Commissioner, said in a TV interview with Finland's national broadcaster YLE.

"But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of 100,000 euros is sacred, deposits smaller than that are always safe."

The European Commission is currently drafting a directive on bank safety which would incorporate the issue of investor liability in member states' legislation.

To secure a 10 billion euro EU/IMF bailout last month, Cyprus forced heavy losses on wealthier depositors. Initially it had also pledged to introduce a levy on deposits of less than 100,000 euros - even though they are supposedly protected by state guarantees - before reneging in the face of widespread protests.

Rehn also said that the European Central Bank should launch fresh action to help boost the recession-hit euro zone economy.

ECB President Mario Draghi, at a press conference on Thursday, opened the way for the bank to possibly cut interest rates and to take fresh 'non-standard measures' - steps other than classic rate moves, such as government bond purchases or funding operations like the twin three-year loans it offered banks just over a year ago.

Rehn said that high financing costs for companies, especially in southern Europe, were a major problem right now.

"Therefore, the ECB's talk on Thursday about both standard and non-standard measures is very important because the ECB may have a role in making the situation easier," Rehn said.

Originally published by Reuters.

 

Article Tabs

If Edelman is serious about not working for groups that deny climate change, it needs to dump the American Legislative Exchange Council – which which works harder than anyone to block climate policy.

Army, Navy, Air Force and Marine Corps staff have been prohibited from reading stories published by The Intercept because they may contain classified information from a "potential new leaker."

The shooting of Michael Brown unearthed in Keith Griffin powerful and once-latent feelings about race, community and an individual's responsibility in times of crisis.

Five months after the police killing of 28-year-old Alejandro Nieto, protesters are returning to the streets Friday to demand justice – from San Francisco to Ferguson, Missouri.

New but little-known Pentagon directives authorize the use of armed drones against American citizens in the homeland in the context of domestic emergencies.

Public university-paid social scientists identify "threats" from mass movements and Muslim NGOs on behalf of U.S. military intelligence.

Posted 3 days 15 hours ago

Like other water-related crises this year in West Virginia and Detroit, the poisoning of Toledo's water is tied to corruption at the highest levels of state government by corporate special interests.

Posted 6 days 13 hours ago

An Austin grand jury asserts Perry abused his official powers by promising – then carrying out – a veto on $7.5 million in funding for public corruption prosecutors.

Posted 3 days 15 hours ago

Can peacefully exercising First Amendment rights create lasting change if police have weaponry and, apparently, legal authority to immediately and violently disperse crowds?

Posted 2 days 9 hours ago

Groups engaged in activism for social change are susceptible to being ranked higher on the radicalism threat-scale by the Pentagon's Minerva research program.

Posted 2 days 9 hours ago

Campaigners hail "major victory" as council representing half a billion Christians says it will stop investing in fossil fuels.

Sixteen of the world’s largest banks have been caught colluding to rig global interest rates – so why are we doing business with a corrupt global banking cartel, and isn't it time someone prosecuted them?

The French resistance hero who co-drafted the Universal Declaration of Human Rights and authored a pamphlet that helped inspire the global uprising in 2011, has died.

The Gill Tract's Only Hope is Occupation

This occupation is our last chance to effectively communicate with U.C. Berkeley about the future of this land.

A classified assessment describes the impact of the leaks as 'grave.'

Sign Up