Europäische Abwicklungsfond für marode Banken

European winding-down fund for rotten banks.

After years of discussions, European finance ministers have agreed on some corner points for how they’re going to deal with busted banks: an F.D.I.C.-type fund to settle up bad banks and close them out. The fund is to be created over the course of the next few years and stocked with an initial 55 billion euros provided by the banks themselves, as is the case for F.D.R.’s F.D.I.C. in the U.S.A. The new bank-funded fund is intended to help keep mismanaged banks from shifting their risks onto taxpayers again.

Update on 12 Dec 2013: ZDF Brussels correspondent Udo van Kampen explained the order of who will be called on to bail out troubled banks in the entire E.U.: first Eigentümer (“owners” = bank stockholders?), then Gläubiger (“creditors” = people who have bought the bank’s debt-based bonds?), then accountholders with >100,000 euros deposited at the bank, then taxpayers.

The bank-funded bad-bank fund will not be fully available until 2023, Mr. van Kampen said, and “The new liability rules for banks are now going to go into effect in 2016, two years earlier than planned.”

An economist pundit summed up the steps the E.U. has taken to prevent another huge financial collapse like the one that started on 15 Sep 2008: “We have a common European financial authority, now we have a bank settlement fund and we have creditor liability [Gläubigerbeteiligung, creditors having a stake]: that should help us avoid a similar crisis in the future,” said Carsten Brzeski, describing progress toward establishing the three “pillars” planned for the E.U.’s banking union in 2012 and 2013.

(Oy roe PAY ish ah   OB vick loongs fɔ̃   fir   mah ROAD ah   BONK en.)

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