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

FarmDrop and Open Food Network stress the desire to create positive, systemic social change that disrupts the existing dominance of supermarket provision of food.

Republicans are arguing that Wall Street should have the constitutional right to influence politicians and the investment decisions those politicians make on behalf of pension funds and pensioners.

As the outrage in Ferguson takes on new forms and becomes less openly confrontational, the shooting of Michael Brown has started a nationwide dialogue about race, class and American law enforcement.

The vote on Independence is a moment of unprecedented possibility for Scotland to peacefully reject the U.K.'s failed neoliberal agenda.

Grassroots organizations that once made American democracy strong plummeted in the Reagan era – when political parties stopped representing the views of constituents and turned instead to money.

Charlie Hardy, the 75-year-old former Catholic priest now running for Senate, wants to halt NSA spying on ordinary citizens and overturn Citizens United with a Constitutional amendment.

Posted 6 days 19 hours ago

If we want a healthy society that follows its laws and applies them equally to everyone, we must demand a full investigation and criminal prosecutions for everyone involved in the mortgage backed securities fiasco.

Posted 4 days 11 hours ago

The vote on Independence is a moment of unprecedented possibility for Scotland to peacefully reject the U.K.'s failed neoliberal agenda.

Posted 3 days 16 hours ago

From clashes during the Occupy movement to violence this month in Ferguson, Mo., researchers say protests get ugly when officers use aggressive tactics, dress in riot gear and line up like military.

Posted 6 days 19 hours ago

FarmDrop and Open Food Network stress the desire to create positive, systemic social change that disrupts the existing dominance of supermarket provision of food.

Posted 3 days 15 hours ago
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.

Outsized chunks of our taxes fund the military, rising healthcare costs and interest on the federal debt while relatively tiny amounts go to education, science, alternative energy, and the environment.

A Company That Runs Prisons Will Have Its Name on a Stadium

On Tuesday, Florida Atlantic University in Boca Raton solidified a $6 million deal to rename its football building GEO Group Stadium, after the private prison corporation.

More than 99% of Egyptian women experience sexual harassment, according to a recent UN report, and sexual violence against women is only beginning to gain recognition in the aftermath of the country's revolution.

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.

Sign Up