HELSINKI: 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 yesterday, but noted that Cyprus’ 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 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 ¤10bn 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 — 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.
ECB President Mario Draghi, at a press conference on Thursday, opened the way for the bank to possibly cut interest rates and to take fresh ‘non-standard measures’ — steps other than classic rate moves, such as government bond purchases or funding operations like the twin three-year loans it offered banks just over a year ago.
Reuters
