April 10, 2013 Leave a comment
European Union ministers will consider a proposal this week to impose losses on interbank deposits of lenders in dire financial trouble as they shape a draft EU law introducing powers that would also penalize those with big savings.
Such an idea, should ministers back it, could further rattle the confidence of lenders, already nervous about draft legislation to determine who alongside shareholders should suffer losses when a bank gets into trouble.
EU finance ministers, gathering in Dublin this Friday, will discuss how to shape this law that could take effect from 2015, covering what is known as bank recovery and resolution.
The talks follow the recent decision to impose heavy losses on some depositors in Cyprus, in return for an international bailout. That set a precedent, which is likely to be mirrored in these EU rules, making losses for large uninsured savers a permanent feature of future banking crises.
But the ministers will have to tread carefully in their discussions.
ECB President Mario Draghi recently cautioned that Cyprus’s bailout was “no template”, in a bid to ease market fears that bank deposits would in future be fair game for international lenders supporting struggling euro zone countries.
In a document prepared by government officials in Ireland, which as holder of the rotating EU presidency will chair the ministers’ gathering, they write that interbank deposits of less than one month should also be penalized.