Reorganizing and liquidation of troubled banks agreed in Europe
EU finance ministers have reached an agreement on the rules for winding down banks. The new bail-in plan is to rescue banks through funds of creditors and depositors, not at the expense of taxpayers, reports RBC-Ukraine.
New rules allow national regulators enough flexibility in the event of a banking crisis. However, the agreement ensures that the first funds to salvage a failing bank should come from creditors and depositors.
Creditors and depositors with accounts over €100,000 would have to contribute first.
Only after these funds account for more than 8% of the bank's total liabilities, national governments may step in to protect savers. According to the new agreement governments will be able to use special national resolution funds to further finance rescue measures, however these funds are limited.
Agreement also allows Eurozone states to make use of the common €500 billion resolution fund allocating funds that can go directly to troubled banks.
The nations are also obliged to provide a security deposit of 1.3% from total deposits to ensure funding if necessary.
