Plans from Brussels put the onus on bank depositors, rather than the taxpayer, to bear the costs of bank failures. "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," Mr Rehn, the European Economic and Monetary Affairs Commissioner. "But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of €100,000 (£85,000) is sacred, deposits smaller than that are always safe." Mr Rehn was referring to a directive being drafted by the European Commission on bank safety which would set out investor liability in the law of member states. He was speaking in an interview with Finnish TV after Cyprus last month forced richer depositors to suffer heavy losses in order to secure a €10bn bail-out from the EU and the International Monetary Fund. ... Cyprus had initially planned to make people with deposits under the crucial €100,000 mark to take a cut also before performing backtracking in the face of an outcry. Smaller deposits are supposed to be protected by state guarantees. Mats Persson, director of think-tank Open Europe said: "Rehn was only re-stating what's in an EU proposal tabled in 2012, which quite sensibly suggests a mechanism whereby first, investors and secondly, large depositors - rather than taxpayers - foot the bill when a bank goes bust. “However, there's so much uncertainty around the precedent set by the Cyprus bail-out that his comments may still cause some jitters." Mr Rehn also said that the European Central Bank should launch fresh action to help boost the recession-hit euro zone economy....
Cyprus will not be the model for future EU bailouts
Cyprus will no be the model for future EU bailouts
Cyprus will n be the model for future EU bailouts
Cyprus will be the model for future EU bailouts.
EU word games.
Just like all Humpty Dumpty outfits - when they use a word it means whatever they want it to mean.
Cyprus will no be the model for future EU bailouts
Cyprus will n be the model for future EU bailouts
Cyprus will be the model for future EU bailouts.
EU word games.
Just like all Humpty Dumpty outfits - when they use a word it means whatever they want it to mean.
4 comments:
"Still cause some jitters"? Does Rehn own shares in a non-Euro based bank or is he simply confirming again my long held view that every time you think the EU has done something more idiotic and impossibly stupid to repeat, they come up with an even worse proposal. Does Rehn understand the fundamental difference between shareholders and bondholders versus depositors? Does he understand that banks can only function if they retain the confidence of depositors? Why doesn't he claim his Euro 400,000 golden parachute and retire? It would be cheaper for EC taxpayers if he did this now.
Haircut.? It sounds more like a decapitation
The illusion is that by victimsing only large depositors the small ones shall be saved. In reality, if you hit the big money businesses will fail and a reverse multiplier (the divsion effect?) will hit us all anyway.
Wholesale theft cannot affect only those who are immediately assaulted. We shall all pay for such behaviour.
Either the EU thinks us stupid, (given its attitude towards democracy this is possible), or it believes you can pick and choose who to steal from and manipulate the affects of such a massive, unjust and offensive act.
Trying to rescue an economy by gigantic theft is as stupid as trying to put out fire with petrol. The EU should be working on either something vastly more sophisticated to rescue the Euro or get real and work out the least costly way of its abolition.
As it appears ignorant and ideologically caged the only other option is to continue thrashing around until events take over and the Euro causes an EU implosion. That would be a disaster for all of us because local national politicians have been infantilised by big EU for so long that they are not capable or able to be real national politicians again.
Maybe not a bad idea: at least it removes the burden from the taxpayer directly. But I wonder who those "large" depositors really are: not necessarily the ultra-rich but instead institutions like other banks and money market and managed funds that are the comingled money of small investors... so while a layer of protection might be added the penalty comes back to the small guy with 5-25,000 on deposit or under management.
Money managers do have more clout when they move money around, and if a bank is considered at-risk then the managers don't deposit there and/or require higher interest income to partially offset any risk of principal loss. But doesn't that just cause a huge "hot money" problem where money managers start moving in and out of deposits based on opportunity and the ability to influence banks by threatening to pull money out if they are unhappy.
At least it might move oversight slightly away from ignorant government officials who are so easily passed a few pounds to turn their heads the other way or bend under political pressure to not enforce regulations or both. It's "free-market, free-for-all, de-facto" regulation, and I rather like that
So depositors leave less than 100,000 euro in their accounts = zero collected, as you rightly said
So the "sacred" limit will be reduced to circa 20,ooo ...without warning!
Anyway i thought the high street banking side of these banks was meant to be ring fenced from the investment side.
Surely if a bank goes under (now) because of its "loan" book, then previous write downs (which they have already been given bail-outs for) have (fraudulently) been revalued too high, therefore the Bankers,Central Bankers and Governments should all be taken to account.
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