Brussels, 28/03/2013 (Agence Europe) - Finance Watch, an organisation representing European consumers against the finance industry, has issued a press release saying that the solution found for bailing out Cyprus' banks should be a model for future bank crises.
In Cyprus, bank shareholders, bond-holders and people with savings of over €100,000 in the country's two biggest banks (the good assets of Laiki are being merged with a restructured Bank of Cyprus) will lose substantial amounts of their cash, possibly more than 40%, though savings of up to €100,000 will not be raided. Finance Watch says: “We hope that the decisions taken in the Cyprus bank deal will be reflected in the EU's coming Bank Recovery and Resolution (BRR) legislation and become the rule for managing bank crises in Europe”.
European Parliament rapporteur (on draft BRR legislation to be voted upon by the EP's Economic and Monetary Affairs Committee at the end of April) Gunnar Hokmark (EPP, Sweden) told Reuters that a bail-in should be made from savings too. Savings of under €100,000 are protected, but savings of over €100,000 are not, so they should be seen as capital that can be called up, he explained.
Finance Watch says that making both junior and senior lenders contribute introduces a hierarchy among investors and forces greater discipline on the inter-bank lending markets because lenders will be forced to re-assess the credit rating of banks they lend to.
“Finance Watch warmly welcomes the decisions to honour deposit guarantees for all deposits up to €100,000 and to bail in both junior and senior bondholders of Laiki Bank. These two elements are essential for public confidence in banks and will help to protect the public from paying for the mistakes of finance professionals. It is in all EU citizens' interest that these are not dismissed as 'one-off' or 'special case' measures”, said its secretary general, Thierry Philipponnat, adding: “A situation where bank resolution rules are applied to banks that are 'too small to bail out', as in Cyprus, but not to banks elsewhere in the EU that are 'too big to fail' would be intolerable for taxpayers and the economy”. (MB/transl.fl)