Political deal agreed in EU to save failed banks
Since 2008, European taxpayers have given €1,600 billion in support of the banks during the financial crisis. The European parliament is now in the process of agreeing a deal between EU member states and deciding upon final bailout conditions, integrating finances, and establishing a central authority.
This central authority will have the power to shut down banks in the Eurozone. The finalised bailout criteria are a precondition after which failing banks will receive money directly from common Eurozone rescue funds.
The aim of this political agreement is to prevent collapsing banks affecting
weak economies any further. By shutting down banks that are too far gone to be rescued and propping up banks that have potential to recover, the EU financial situation will be greatly improved.
Banks within the Eurozone will be regulated by the European Central Bank from 2014. Germany’s finance minister, Wolfgang Schäuble, made it clear that the changes being made put shareholders and creditors “liable first and foremost”.
Dubbed the “bail-in”, the political agreement will be able to force contributions to failing banks from shareholders and bondholders, as well as some depositors. This will come into effect from 2018. Small companies and uninsured deposits of individuals are given certain advantages with regard to this, and insured deposits below €100,000 are exempt from mandatory contributions.