Cyprus deal is a new template – senior EU lawmaker

0ccf000 hkg8421852 Cyprus deal is a new template   senior EU lawmaker

The Cyprus deal will serve as a template for future bank restructuring in the eurozone and will see the European Parliament now demanding big shareholders, bondholders and uninsured depositors to take losses in restructuring if their banks start to suffer, Dutch Finance Minister and head of the Eurogroup of eurozone finance ministers Jeroen Dijsselbloem told the media. “What we’ve done last night is what I call pushing back the risks,” Dijsselbloem told Reuters and the Financial Times hours after the Cyprus deal was struck Monday.”If there is a risk in a bank, our first question should be ‘Okay, 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 said. The new template is now likely to turn into a full-scale EU law, letting taxpayers off the hook in case a bail-out is needed, but imposing major losses on bigger savers on a permanent basis.”You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, member of European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks, Reuters reported.”Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed the idea. The European Commission has written the draft of the law, which now awaits approval from eurozone member states and the parliament on whether and when it can be implemented. It’s been reported, the law is planned to take effect in the beginning of 2015. The International Monetry Fund and German officials back the new template and see it as a more sustainable approach to battling the sovereign debt problems that spread like a virus in financially weak members of the eurozone.

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Cyprus deal is a new template – senior EU lawmaker

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