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EU FinMins agree on banks bail-in; deposits below €100K safe. Or not?

…and so it’s definite. Money savers will bail-in banks going bankrupt. The European Union ministers decided so early Thursday. the noble ministers took this decision in an effort to cut the cost of taxpayer-funded bailouts. From what I understand the bail-in will be based on a pyramid scheme according to which first to come up for the bail-in will be shareholders, bondholders, then depositors with more than 100,000 euro in their bank accounts. with this decision depositors of more than 100K are renamed as “investors”.

Exempted from the enforced bail-in are depositors with less than 100,000 euro.

EU Reaches Pact For Failing Banks

Ministers stressed that depositors with less than 100,000 euros($130,820) in their accounts would always be safe, while small and midsize companies and bigger savers would only be hit during the most severe bank failures. As an extra layer of protection for taxpayers, governments will have to start building up resolution funds by collecting levies from banks.

Before national authorities can employ either money from their resolution funds or public purses, they have to impose losses on at least 8% of a bank’s total liabilities.

Taxpayer-funded bailouts will only be allowed under “extraordinary circumstances,” when it is technically impossible to impose losses on certain creditors in a rush or when a government is worried about effects on financial stability, officials said. Such exceptions will have to be authorized by the European Commission, the EU’s executive arm.

Rich countries like Germany and Finland worked hard to make it as difficult as possible for poorer countries to tap the euro-zone rescue fund. (full article Nasdaq)

While millions of depositors with less than 100K burst into tears of joy upon hearing the good news, Capital.gr claims that the EU finance Ministers left a window open to be able to grab also this money.
“The “bad” news is the small print of the agreement reached yesterday. According to EU sources, there is a window: That’s not even safeguard depositors considered as Secured, ie those with lower amount of 100,000 euros.
That is if all other options (stocks, bonds, unsecured deposits over € 100,000) fail and in order to avoid  burdening  public money and taxpayers, also the small depositors will be called in to bail-in.” (full in Greek here)
I would not worry about the fate and risk for my 102,68 euro deposits, distributed in three banks, to safeguard them from a haircut, so to say.
I have faith in our finance minister Yiannis Stournaras. He told the Greek Parliament on Wednesday that

“The guaranteed bank deposits are absolutely secure. I feel  sorry for those who speak about another “bank deposit haircut”.

Who are these Greeks upsetting our finance minister and make him feel sorry? oh, that’s the opposition…
PS If the depositors are to come up for bank losses, they should also be appointed to management board so they can control how the bank deals with their money. Through a small depositors representation. Not?

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3 comments

  1. This applies from 2018 on (at the earliest), if (IF) the law passes EU-Parliament.