Kaskade von Haftung

“Cascade of responsibility.” New package of banking rules agreed by the European finance ministers on 27 Jun 2013 defining an order of responsibility for saving failed banks: first the banks’ shareholders will pay/lose money. Next, people who loaned the banks money to make loans will pay. Then, owners of large accounts >100,000 euros will pay. Last, the taxpayers will pay. Savings accounts <100,000 euros at failed banks are guaranteed to be refunded, if need be by taxpayers.

CNN.com reported that a hierarchy was also defined among large depositors, with big businesses being asked to pay before small and medium-sized businesses.

Details the day after the announcement: Under the new rules, being called a “bail-in regime,” when a bank is unable to meet its financial obligations, 8% of its debt will be paid by the bank’s shareholders, creditors/bondholders and large depositors. The next 5% will be paid by country bank funds (that will have to be set up). If that’s still not enough, the country will have to decide what to do.

The Guardian.co.uk reported that the second layer, country bank funds, responsible for rescuing 5% of failed banks must “come from a resolution fund which has to be built up over 10 years and cover 0.8% of the insured deposits in any given country.” The UK got excused from having to create or at least fund that fund because they said they wanted to collect a “bank levy” instead, for what sounds like an FDIC-type scheme in which banks (help) pay for failed banks. CNN.com reported that the resolution funds would also contain mandatory bank contributions, however.

(Coss CAW deh   fon   HAWF toong.)

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