The European Union finance ministers have agreed to a draft deal establishing who will pay for bank bailouts in the future.
The burden of bank rescues, under the new rules, would shift from taxpayers to bank shareholders and bondholders, followed by depositors with more than $132,000. The measures must be approved by the European Parliament.
Under the new rules, which are expected to go into effect by 2018, countries would be obliged to distribute losses up to the equivalent of eight percent of a bank’s liabilities.
Irish Finance Minister Michael Noonan said the proposed deal establishes the “bail-in as the new rule,” making it clear that the banks will suffer before the government steps in to help, if at all.
The agreement, reached by the finance ministers Thursday, is an important step toward establishing Europe’s so-called banking union with the goal of restoring financial and economic stability to the recession-hit bloc.
(Photo: Sébastien Bertrand)