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

Protesters in Hong Kong on Tuesday ignored calls from the region’s chief executive to abandon pro-democracy demonstrations as numbers grew on the eve of a public holiday.

How do politicians who are unresponsive to the interests of the vast majority of their constituents get elected and, more important, re-elected, while doing the bidding mostly of the wealthiest individuals?

The City Council voted 12 to 3 last Wednesday to impose the higher wage on large hotels, delivering a huge victory to a coalition of organized labor, neighborhood councils and the ACLU.

The U.K. government recently removed 23 passports of citizens attempting to travel to Syria and is increasingly seeking to take action on terror suspects who are already abroad.

School districts nationwide are debating whether to keep their Pentagon-issued arsenals.

KathyJo Torrenga and her husband decided to challenge their foreclosure on their own, learning as much as they could about mortgage securitization and the damages caused by it.

Posted 5 days 6 hours ago

Americans need to say no now to this new scheme, lest we allow the past mortgage crisis to become a current rent fiasco.

Posted 6 days 23 hours ago

2014 is on pace to be the Year of Dark Money.

Posted 5 days 5 hours ago

A publicly-owned bank could help Scotland take control of its own economic destiny by avoiding unnecessary debt to a private banking system that's become a burden to the economy.

Posted 5 days 5 hours ago

This Acronym TV report from the Flood Wall Street day of action features exclusive footage, analysis and interviews with people at the heart of the movement.

Posted 5 days 5 hours ago

For train operators and other BART workers, the belief is that a strike on August 4 may be the only way to get their voices heard -- and despite antagonism in the media, they hope residents understand their position and support their goals.

A top-secret report concluded that Germany owes Greece upward of €160 billion in World War II reparations — enough to solve the country's debt problems.

Brendan McDermid

After serving as the epicenter for press suppression and journalist arrests over the last nine months, the NYPD is trying to rewrite history and pretend like nothing ever happened.

Notes from the New War Generation

I was born in 1991. I’ve lived over half my life in a nation at war.

Idle No More: From Grassroots to Global Movement

For First Nations people, Bill C-45 introduced last fall by the Harper government represents the culmination of hundreds of years of colonial attacks on indigenous sovereignty -- a sovereignty that is fundamentally tied to the use of treaty lands.

Sign Up