The idea to bail-in banks with depositors’ money will soon be more than just an idea – or a “Cyprus template” as Eurogroup head Jeroen Dijsselbloem said two weeks ago. It will be decided through an EU directive, as economic affairs commissioner Olli Rehn announced on Saturday in a television interview.
“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.” (REUTERS via Businessinsider)
Rescuing banks’ bad management with citizen’s money? No thanks 🙂
PS Until German Chancellor Angela Merkel runs for elections again in September 2013, the European Union and the Eurozone will have been totally fallen apart. If she wins the elections, she can sit alone on her beloved euro…
BTW: If we, Europeans, are to have Merkel as the Super-Europe ruler, we should also be allowed to vote in Germany, shouldn’t we?
…she can sit alone on her beloved euro…
Yes, but it should be well stuffed for the comfort and pleasure of her royal bottom.
final target: a bubble euro, after all
Ka-Boom!!! 12.9 on the Richter Scale. Earth covered and destroyed by sauerkraut stained Eurodollar fragments.
There must be a huge misunderstanding caused by the utterings of Ollie Rehn. There can NEVER be a directive to seize deposits. There can ONLY be a bankruptcy law (or something close to it). A bankruptcy law for banks (as well as for countries!) would be most welcome!
To hit deposits with a special tax is actually a matter of wealth taxes. One can tax any wealth if the political will decides to do so. But, then, bank deposits are only part of one’s wealth. Here, the correct procedure would be to require citizens to file numbers on their entire world wide wealth (the Swiss do that!) and to apply taxes appropriately. Again, only if there is a political will to do so. But to tax only part of one’s wealth without considering the remainder is nuisance.
What Rehn suggests should be part of a bankruptcy law for banks. Actually, there are bankruptcy laws for all corporations, including banks but banks play such a special role (too-big-to-fail) that one has rarely dared to apply the bankruptcy laws to them. A bankruptcy law for banks should spell out clearly the waterfall-principle of who has to contribute what in case of failure. For example: shareholders come first; ‘professional market participants’ come second; and depositors over 100 TEUR come last. Or whatever other waterfall is politically acceptable. But whatever it is, it needs to be spelled out!
they (Dijsselbloem, Barnier, Rehn) have been spelling this since March 25th (?).
why should deposits money should be 2x/3x taxed if depositor has already paid taxes via income declaration and he pays taxes for the interest he receives?
why are depositors considered as investors?
why banks do not distribute profits to depositors then?
There is absolutely no misunderstanding about O.Rehn’s mutterings. This is what he is on about
It includes this little beauty on page 8
Which is of course nothing short of a “carte blanche” to do whatever they like to protect “wealth”, even if it means stealing somebody else’s deposits. Cyprus is nothing short of a test run, a beta version of the real thing yet to come. Quite possibly to be in place just before Italy goes down the toilet.
The only thing that needs spelling out is that banks are private companies, and those investing in them run the risks just like those investing in any other private company. Deposit holders, just like tax payers, are not “investors”. they are without a doubt victims.
When Anglo Irish Bank went bust in Ireland, followed by “First National”, not one investor got burned. Not a penny did they lose.
the Irish tax payer, on the other hand, will be paying for generations to come to pay back “the debt”. Meanwhile, Mssr. Fitzpatrick, Fingleton & Co are enjoying multi million Euro worht of pensions, playing gold on the most expensive golf courses in Europe, and genreally having a good time. They should be joining their Icelandic fellow gamblers and be in jail. Instead, Joe Soap is in jail for years to come…