Tuesday

17th Jan 2017

MEPs vote to protect small bank depositors

  • Fifty-nine banks in the EU have been restructured following the start of the financial crisis, says the European Commission (Photo: Fergus Ray Murray)

Large depositors in the EU will from 2016 be in line to suffer losses if a bank gets into serious trouble, but deposits under €100,000 should be fully protected, MEPs in the economic affairs committee voted late on Monday (20 May).

“The bail-in of any creditors should be done according to a clear hierarchy, with depositors with savings over €100,000 last in line, whilst deposits under €100,000 would be fully protected,” said Green economic and finance spokesperson Philippe Lamberts in a statement.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The votes amended the European Commission’s bank recovery and resolution proposal.

The proposal outlines steps to ensure taxpayers will not have to fork out because financial institutions are “too big to fail.”

But the taxpayer is not completely out of the picture.

Deputies say the commission’s proposal will need to spell out the worse case scenario.

They added new text which states that “in times of systemic crisis member states may provide extraordinary public financial support.”

It says such government tools should only be used “as a last resort after having assessed and exploited the other resolution tools to the maximum extent possible practicable whilst maintaining financial stability.”

An EU official close to the issue said the goal is to make sure that taxpayers only come in at the very end.

“The article puts in place on how to do this,” he said.

He said the commission’s original proposal in 2012 had obtained little political support until Cyprus hit headlines earlier this year.

The island nation took on a €10 billion rescue package from the EU and the International Monetary Fund (IMF) following a massive bank failure.

Bank depositers with over €100,000 in two Cypriot banks were told to contribute some €6 billion to the package.

Those with less than €100,000 had also been told to contribute until a public backlash forced officials to retract the idea.

Deputies decided to guarantee the security of bank deposits of at least €100,000 or less following the Cyprus bailout debacle.

The European Central Bank (ECB) wants the bail-in guarantee to start immediately.

The commission proposed 2018. The parliament’s lead negotiator on the file suggested January 2016 as a compromise.

The committee deleted a commission proposal on using deposit guarantees to help out ailing banks. Instead, they replaced the commission’s proposal with an article on how to protect insured depositors.

The voted text aims to set up European standards on how resolution authorities will undergo their work but with a national slant.

Deputies say the authorities should be able to force banks to adopt a credible plan. They can also restructure the ailing bank if necessary.

The commission, for its part, is set to come out with a proposal for European resolution mechanism and a European resolution fund over the summer.

“Ultimately, the creation of a European bank resolution fund, funded by the banks themselves, would provide the greatest protection but proposals to this end have yet to be made,” said Lamberts.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey