Here We Go Again: EU Lawmaker To Push For Bail-In Resolution Law For Deposits Over €100K

Tyler Durden's picture

Here we go again:


Basically, this is DieselBOOM ver 2.0. How long until someone scrambles to announce that this, too, was taken out of context?

More as we see it but the EURUSD sure isn't waiting. Instead, it is plunging.


Full Reuters article:

The European Parliament will demand that big savers take losses if their banks run into trouble, a senior lawmaker told Reuters, adding momentum to a policy unveiled as part of a Cypriot bailout.


Although some policymakers have sought to portray Cyprus and the losses suffered by depositors at two of its banks as a one-off, many experts believe it marks a dramatic change in tack in how Europe deals with troubled banks, to spare taxpayers who have been on the hook for previous bailouts.


Jeroen Dijsselbloem, head of the Eurogroup of euro zone finance ministers, said on Monday that in future, the currency bloc should first ask banks to recapitalise themselves, then look to shareholders and bondholders and then "if necessary" to uninsured deposit holders.


Now the likelihood is rising that tough treatment of big depositors will be written into a new EU law, making losses for large savers a permanent feature of future banking crises.


"You need to be able to do the bail-in as well with deposits," said Gunnar Hokmark, an influential member of the European Parliament, who is leading negotiations with EU countries to finalise a law for winding up problem banks.


The European Parliament has an equal say alongside EU countries when deciding who must bear the brunt of future bank failures such as those now being seen on Cyprus.


"Deposits below 100,000 euros are protected ... deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in," Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed this line.


The law, which will also introduce means to impose losses on bondholders, is due to take effect at the start of 2015. Germany wants provisions for bailing in bondholders and others in the same year, though that may be delayed.


The European Commission wrote the first draft of the law but left it to member countries and the parliament to decide whether and when savers should face losses, when a failing bank is being salvaged or shuttered. Earlier on Tuesday, it said only that such a step was possible.


Hokmark urged savers to check their banks' health before taking the risk of depositing money.


"If you put your money in Royal Bank of Scotland ... or Deutsche Bank, depending on how that bank is working you are taking a risk," he said. "You need to be aware that you are taking a risk.


"I want us to legislate in a way that makes investors aware of the risk," said Hokmark, adding that savers should be asking whether their bank is solvent. "The bail-in instrument is creating thousands and thousands of supervisory authorities."


Cypriot President Nicos Anastasiades agreed in a last-ditch deal to close down the second-largest bank, Cyprus Popular, and inflict heavy losses on big depositors, many of them Russian, after Cyprus's financial sector ran into trouble when investments in Greece went sour.


"The markets may be shocked but some principles have to be laid down," said one EU official, speaking on condition of anonymity, adding that it would be "unfair" for the new EU law to take a different approach to that used in Cyprus.

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machineh's picture

Now 'the rich' means anybody with a $100K bank account.

(Yeah, I'm talkin' to you, Hillary.)

King_of_simpletons's picture

South Park's "Aaand it's gone" has special and direct meaning now a days. You deposit in the bank and it will just vanish. No need for derivative investments....... It will literally vanish.

CrazyCooter's picture

I have been expecting "the end" for so long ... and been wrong for so long ... now that it seems to be here, I can't believe it.

Am I my own contrary indicator?



Cdad's picture

No.  It's just a sign that you are not mentally retarded.  Good for you.

Divided States of America's picture

Funny, the Dow didnt even bulge

camaro68ss's picture

Those f***ing C*** suckers!

Way to install Confidence you jackasses

Pladizow's picture

This stupidity must be orchastrated!

camaro68ss's picture

if you leave money in the bank now after all this, your a dumb ass.... I guess its a good way to get people off the sidelines to pump the markets more, until there is no cash left to spend.

Stackers's picture

EURUSD now in full retard mode as it made a 500bps down and 500bps move right back up in a matter of minutes

Stuart's picture

Revolutions start this way. 

Comay Mierda's picture

what time is dancing with the stars on again?

redpill's picture

Can someone explain why these stupid fucks would want to chase out all the large depositors from the EU?

TruthInSunshine's picture

Peter Gibbons: This sounds familiar.
Michael Bolton: Yeah. They did it in Superman III.
Peter Gibbons: Ahhh, right.

Tortfeasor's picture

Possible reasons:

1. To ramp stocks.

2. To consolidate banks (crush the little guy).

3. To get paper money out into the streets, then switch to all digital currency.

4. To watch the world burn.


5. Because they don't really know what they're doing.

Rubicon's picture

This deserves a nobel prize... but im not sure which one...

MsCreant's picture

Dynamite money... works for me.

indygo55's picture

You would think at least some of it would go into PM. Physical PM that is. But PM's dont really budge. Don't know why. Oh, never mind.


Gief Gold Plox's picture

How in the name of Zues' butt can the EUR be going up among all this crap?

BIS hittin' the buy button like it's got an army of 13 year old girls on Bieber's facebook profile?

NoDebt's picture

They're not trying to instill confidence.  They're going to suck all of southern Europe dry.  What they are saying, in so many words, is that only German banks are safe.  And people are believing it.  If you are with an insolvent bank in an insolvent country you're S.O.L.

Germany's pimp hand has been shown to be strong.  I think they just conquered Europe without firing a shot.


TruthInSunshine's picture

Krugman just had a non-nocturnal emission.

The only thing better for Paul "I realize & used to teach that savings is a critical foundational pillar of enabling future economic growth, but that was then and this is now" Krugman would be if the deposits in excess of a sum certain amount were confiscated by the state in order to build The Government Window Breaking Device Machine Works Company, Plant No. 202-Union Local 903.

Relentless's picture

Send in the Sturmbankers

Urban Redneck's picture

If they are trying to show German banks are safe... they are FUCKING STUPID.  The will wind up destroying the entire prime banking business in Europe to benefit of JPM (and the other TBTFs in the US) and their counterparts in Asia.  

Multinational homies don't play that confiscation game...

Nothing To See Here's picture

Because there's got to be something bullish in this news...

The Big Ching-aso's picture

Shit.    When there's no cash left in the banks I guess a cashless society will be a piece of cake.

Jason T's picture

the dow has been poisened so many times, it has developed an immunity.


akak's picture

What doesn't kill you only makes you ...... apparently even more retarded.

RougeUnderwriter's picture

All of the money from these banks are going into it - it will go higher

toys for tits's picture


"I want us to legislate in a way that makes investors aware of the risk," said Hokmark, adding that savers should be asking whether their bank is solvent. "The bail-in instrument is creating thousands and thousands of supervisory authorities."

No it's not, thousands and thousands of depositors will leave the banks, dumbass.
CheapBastard's picture

Why not make bankers personally liable for losses. I suspect they would limit their risk more. Probable decrease the number of failed banks to a handful instead of an epidemic.

Acet's picture

For all the ranting about the evils of Socialism around here, people do seem to want things that amount to very expensive Socialism for the middle and rich classes.


There should be NO state-subsidized protection on deposits.


Sure, if some banks want to get together and setup and pay for a deposit protection scheme as a means of attracting deposits, go ahead and do it. Other things that they might do to attract deposits is to have NO investment banking operations at all and to keep their loans-to-deposits ratio as low as possible.

This would be a real Free Market in banking: people would need to look around and shop for the safest banks, maybe even *gasp* not keep all their eggs in the same basket, banks would need to be carefull so as not to scare deposits away. It would be a stable, robust system, completelly different from the immense, vampire populated castle of cards that passes for a financial system nowadays.

The perversion of the free market which is state protection for depositors is the main factor that allowed banks to take ever bigger risks without being punished by their customers for it.


thisandthat's picture

There is no state subsidized deposit protection - current insurance is paid up by banks, same goes for insurance companies and pension funds. this is Eu legislation.

Acet's picture

So why did the British and Dutch governments refunded depositors when the Icelandic banks collapsed?

You see, that EU law you mention only covers a very small amount: anything beyond that is guaranteed by the state. Also openly admited that the available money in those deposit protection funds would only be enough for the collapse of a couple of small banks, maybe one big one, which is why governments all around Europe keep intervening to save banks, from RBS to Dexia.

There is a de facto government guarantee on deposits across Europe.

thisandthat's picture

They refunded because they chose to (politics and hoping to be reimbursed by Iceland), but Iceland isn't part of the Eu, so Eu guarantees don't apply there.

EU directive, not law, sets 100k coverage per holder, per bank (with exclusions), so in practice you could be insured for much more than just 100k, by holding multiple  accounts, with multiple holders, at multiple banks (and since funds are national, also in multiple countries), but anything above that isn't covered by anyone, unless someone chooses to (except in Ireland, where apparently there's no limit, and Denmark, 750k DK). You're right about the size of the funds, though - in Portugal, for instance, in 2011, it was .03% of deposits... if the fund isn't enough, it will resort to extra contributions or loans.

Portuguese fund's site:

Wikipedia: (unlike what it says here, 100k is still valid in Portugal)

Super Broccoli's picture

it's getting emotionnal ! i've been waiting for this for so long :-) 

Groundhog Day's picture

wake up crazy,

Who said anything about it being over.  I don't see or hear a fat lady singing anywhere

Stoploss's picture

WOW, that sure escalated quickly...

gatorengineer's picture

They are dropping financial nukes left and right but  the preses keep rolling on......

persu's picture

Isn't this just a confirmation of existing rule?

Doposits are covered up 100000 and anything over that is not?

This is like a discussion about credit risk in senior and sovereign bonds. Anyone investing should understand a possibility of loss. Why do we have a credit spread? That is called market discipline.

flyingpigg's picture

I don't believe it is because everything above 100k was at risk when the bank would fall over. With the new proposal it can be used by governments to "save" a bank when the government believes it's necessary. It basically makes it easier for goverments to confiscate savings above 100k.

With fractional reserve banking it's very easy to prove a bank can't meet it's promises. A negative comment from the Eurogroup is a death penalty for a any bank as soon as it erodes trust. 

torak's picture

MF Global was just the flag they ran up the flag pole to see which way the wind would blow after nuking the customers.  No riots in the streets, no assassination attempts on Jon Corzine, no legal repercussions, nobody goes to jail -- life is good for the Banksters. 

So, customers will allow themselves to be Corzined without a peep.  The Banksters now have carte blanche to rape and pillage at will. 

Let the Games begin...

deKevelioc's picture

They said that about the previous straw on the camel's back, too.

akak's picture

The problem there is that they keep jacking up the camel at the same time they keep adding straws to its back --- while overlooking, of course, the fact that the camel's internal organs are slowly being crushed in the process.

MyBrothersKeeper's picture

Did you forget that Congress is exempt from anything that prevents them from gaining more power and wealth?  You know like special healthcare, insider trading, balancing the budget, bribery, kickbacks etc etc

CrazyCooter's picture

Nah, they will just trade it ... short ... long ... they don't care. I bet some back office bureaucrats in Brussels are glued to their eTrade accounts all day ...



akarc's picture

"Isn't this just a confirmation of existing rule?"

And the rule is that rules no longer matter. I hate banks. Having said that how many people with their money in Banks have ignored the endless daily streams of news regarding bank money laundering, insider trading, off book transactions, ad infinitum and still keep their money in Banks without saying shit about any of it!

Where I grew up, if you let me take your freaking wallet guess what. I'll fucking take it again.

If you participate in a corrupt system then you deservedly suffer the consequences of doing so.  That is Karma. You can not blindly allow some one to rip you off and then fucking bitch about it. Get off your ass burn the banks down and then go to Washington and tell the Bankster/Corporate whore to get the fuck out of town.

It won't happen though cause the people will demand that the Bankster/corporate whores fix it for them?  

At some point in time you got to take personal responsibility. Sometimes that means taking an ass whipping.  And if ya can't handle that then go live on an island somewhere.

IT was the people that allowed this situation to become what it is. It is only the people that can fix it. 

Racer's picture

This is definitely a signal to people to get the F&*k out of the banks and go to Bank of Mattress!

Cdad's picture

Quick...everyone transfer ALL CAPITAL to some bank in the Cayman islands!  We need warp speed in 3 minutes or we're all dead.