Thursday

24th May 2018

EU lawmakers divided on compulsory bail-ins for savers

  • Should savers foot the bill for bank collapses? (Photo: William Murphy)

EU lawmakers are divided on whether large holders of large bank deposits should face compulsory levies if their bank hits difficulties.

With the dust yet to settle on a last-minute bailout for Cyprus agreed on Monday (March 25), the European Parliament is expected to propose a future mandatory levy on savings worth more than €100,000.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Gunnar Hokmark, the Swedish centre-right MEP charged with piloting draft legislation on a pan-EU bank resolution regime through parliament, has said that MEPs will push for compulsory bail-ins of large deposits to be enshrined in the new law.

Hokmark told Reuters in an interview on Tuesday (26 March) that "deposits above €100,000 are not protected and shall be treated as part of the capital that can be bailed in."

MEPs on the economic affairs committee are expected to vote on a text to negotiate with government ministers in April.

Under existing EU law on deposit guarantee schemes, countries are required to protect the first €100,000 of savings in the event of a banking crisis.

However, even this principle was recently challenged by the initial plan to slap a 6.75 percent levy on deposits worth between €20,000 and €100,000 as part of the Cypriot rescue package.

Some of the more hawkish member states, including Germany and the Netherlands, are believed to support measures to see investors and savers take a larger share of the burden to reduce the costs to other taxpayers.

The €10 billion bailout for Cyprus is contingent on the country putting together a self-funded contribution of up to €7 billion.

The bulk of the money will be raised by winding down Laiki, Cyprus' second largest bank, and by applying a haircut of up to 40 percent on wealthy savers at the island's largest lender, the Bank of Cyprus.

The rescue package marks the first time that bank depositors have been targeted as part of a bailout deal.

More fuel was added to the fire after Eurogroup chief, Jeroen Dijsselbloem told reporters that the Cypriot bail-in model could serve as a "template" for future bank restructuring in an interview with Reuters and the Financial Times on Monday.

Dijsselbloem commented that: “If there is a risk in a bank, our first question should be 'OK, what are you in the bank going to do about that? What can you do to recapitalise yourself?"

“If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders," he added.

Dijsselbloem was quickly rebuked by two members of the European Central Bank's governing board.

ECB board member Benoit Coeure told France's Europe 1 radio on Tuesday that "Dijsselbloem was wrong to say what he said ... Cyprus isn't a model for the rest of the euro zone."

Austria's Ewald Novotny described the Cypriot deal as "no model for other instances."

For his part, Dijsselbloem later issued a statement indicating that Cyprus is a "specific case."

But his remarks also prompted French President Francois Hollandeto enter the fray. "The guarantee of deposits should be an absolute, irrevocable principle," he told French media on Tuesday.

Eurozone agrees Cyprus bailout 2.0

Cyprus' Laiki bank is to be wiped out. Depositors in Bank of Cyprus will also take a hit under a new bailout deal. But details remain sketchy.

Visegrad Four 'nothing to hide' on rule of law issue

Central European countries say they have "nothing to hide" on rule of law issues - while justice commissioner Vera Jourova said they should agree to the Commission's controversial budget plans on rule of law conditionality.

Analysis

GDPR does not (yet) give right to global oblivion

The 'right to be forgotten' will become enshrined in EU law on Friday, but it is not yet clear to what extent it will apply. Will the EU's law determine how the internet looks globally?

Analysis

GDPR does not (yet) give right to global oblivion

The 'right to be forgotten' will become enshrined in EU law on Friday, but it is not yet clear to what extent it will apply. Will the EU's law determine how the internet looks globally?

News in Brief

  1. Gazprom accepts EU conditions on gas supplies
  2. Facebook tells MEPs: non-users are not profiled
  3. Commission proposes ending France deficit procedure
  4. UK households hit with Brexit income loss
  5. Report: EU faces 10% cut in steel exports to US
  6. Australia wants more access to EU agricultural market
  7. CV of Italian PM candidate under scrutiny
  8. Puigdemont Spain extradition rejected by German court

Stakeholders' Highlights

  1. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  2. Centre Maurits Coppieters“Peace and reconciliation is a process that takes decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  3. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  4. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  5. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  6. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  7. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments
  8. International Partnership for Human RightsAnnual Report celebrates organization’s tenth anniversary
  9. Nordic Council of MinistersNordic Cooperation Needed on Green Exports and Funding
  10. Mission of China to the EUPremier Li Confirms China Will Continue to Open Up
  11. European Jewish CongressCalls on Brussels University to Revoke Decision to Honour Ken Loach
  12. Sustainable Energy Week 2018"Lead the Clean Energy Transition"- Register and Join Us in Brussels from 5 to 7 May

Latest News

  1. Visegrad Four 'nothing to hide' on rule of law issue
  2. GDPR does not (yet) give right to global oblivion
  3. Privacy Shield less relevant given GDPR, says data chief
  4. Unknown academic to lead Italy into EU clash
  5. 'Killer robot' projects eligible for EU defence fund
  6. Funding for European values needs radical changes
  7. Feeble EU format deflates Zuckerberg 'hearing'
  8. Are EU data watchdogs staffed for GDPR?