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

The coalition was set to deliver more than 200,000 signatures to the White House, Department of Homeland Security and Department of Justice, calling for transparency and justice in police killings.

Divestment is less about denying fossil fuel companies the financial resources to operate – it's more about denying them reputation, legitimacy and “social license.”

Americans greatly underestimate the degree of inequality in our country – and if we were given proper media coverage of the endless takeaway of wealth by the super rich, we'd be taking it personally.

Wealthy people are often so isolated from the rest of us, many of them have forgotten how rich they really are.

Two political philosophers, Sheldon Wolin and John Ralson Saul, call for mass movements willing to carry out repeated acts of civil disobedience to disrupt and delegitimize corporate power.

Florida has the highest foreclosure rate in the U.S. in the first quarter of 2014, and also has a "foreclosure king" who is now disbarred for his failure to oversee employees accused of carrying out wrongful foreclosures.

Posted 4 days 15 hours ago

This isn't just a right to revolt, it's a call to revolt, an outright slam against apathy and nonresistance.

Posted 3 days 14 hours ago

"Peoples' movements will either succeed in transforming our economic and political systems to build a new world, or we will burn with the old one."

Posted 4 days 15 hours ago

The city's social justice roots are centuries old – and today Seattle is also home to more than 70 social justice organizations and more than a dozen progressive film festivals.

Posted 2 days 16 hours ago

On Sunday, hundreds of people milled around a protest site in the gentrifying, densely-populated district Mong Kok, manning aid stations and sitting in small circles on the pavement.

Posted 4 days 15 hours ago
Edward Snowden

Snowden told the audience he engaged in civil disobedience because he believes the democratic system of government is not able to work when people don’t know what their government is doing.

The city's social justice roots are centuries old – and today Seattle is also home to more than 70 social justice organizations and more than a dozen progressive film festivals.

Americans greatly underestimate the degree of inequality in our country – and if we were given proper media coverage of the endless takeaway of wealth by the super rich, we'd be taking it personally.

Some critics say that the "militarization of the police" is happening right in front of our eyes – but if the Founding Fathers were so worried about a threat of domestic tyranny, how did we get here?

Florida has the highest foreclosure rate in the U.S. in the first quarter of 2014, and also has a "foreclosure king" who is now disbarred for his failure to oversee employees accused of carrying out wrongful foreclosures.

Sign Up