EU bank bail-out talks deadlocked over saver protection
The European Union has failed to agree rules on who should pay in the event of a global banking collapse after eurozone countries clashed with those outside the single currency over how flexible the system should be.
11:18AM BST 22 Jun 2013
Talks in Luxembourg aimed at ensuring shareholders and bondholders bear the brunt of bank failures rather than taxpayers, failed in the early hours of yesterday morning after almost 20 hours of negotiations. They were described as “chaotic”.
The talks were split over how savers should be treated, with Germany and other eurozone countries insisting on rigid rules that would impose losses on those with more than €100,000 (£85,000) in their account. France and Britain, together with other non-eurozone EU members, want more flexibility to tailor action on failing banks to protect savers.
European finance ministers will reconvene on Wednesday in an attempt to break the deadlock.
“I think we can reach a deal if we take a few more days,” said Michel Barnier, the European commissioner in charge of banking regulation.
“We are not far off now from a political agreement.”
But Michael Noonan, the Irish finance minister who chaired the talks, said there were “still real issues, core issues outstanding”.
“It is principally an issue of the non-euro and the euro,” he said, adding that the gulf between negotiators was so wide there had been no point in continuing. One official at the meeting described it as “chaotic”.
Both sides of the debate are aiming to avoid a repeat of the bank bail-outs that cost taxpayers hundreds of billions of pounds between 2008 and 2011. Agreement is seen as vital to stabilising the European financial system amid continuing recession and political instability in southern Europe.
Earlier at the talks, eurozone financial ministers had agreed rules for how a €500bn central bail-out fund should operate. Non-eurozone countries will not be part of that system and when they joined the negotiations on Friday argued they should not be bound by rigid rules on who pays when banks fail.
Britain, France, Denmark and Sweden insist there should be more leeway to take account of differences in national regulatory regimes. Sweden’s finance minister, Anders Borg, called a one-size-fits-all approach “very dangerous”.
The German-led group sought to use the tax imposed on savers in Cyprus – part of the rescue of the island’s banks in March – as a template for all future bank failures across the 27 EU states.
German finance minister Wolfgang Schaeuble said the new rules should not vary because that could put some banks based in smaller, poorer countries at a competitive disadvantage. Wealthier countries could continue to prop up their banks with public funds, he argued.
Spain’s economic minister, Luis de Guindos, said agreement was vital. “What’s fundamental is there is agreement over the bail-in hierarchy and the protection of small depositors,” he said.
Mr Barnier sought to encourage a compromise. “We need a clear hierarchy for the bail-in while allowing flexibility for national resolution authorities – but it should be constrained,” he said.
Britain was represented at the meeting by Conservative Treasury minister Greg Clark. A spokesman said he remained hopeful of an agreement by Wednesday.