EU Emerges with Deal to Push Bank Costs on Investors

Local Editor

The European Union agreed on Thursday to force investors and wealthy savers to share the costs of future bank failures, thus closer to ending years of taxpayer-funded bailouts that have prompted public outrage.

After seven hours of late-night talks, finance ministers from the 27-country union came up with a blueprint salvage banks by driving shareholders, bondholders and depositors with more than 100,000 euros ($132,000) to share the burden of saving a bank.

"For the first time, we agreed on a significant bail-in to shield taxpayers," said Dutch Finance Minister Jeroen Dijsselbloem, referring to the process in which shareholders and bondholders must bear the costs of restructuring.

Taxpayers across much of Europe have had to pay for a series of deeply unpopular bank rescues since the financial crisis that spread across the bloc to threaten the future of the euro.

The European Union spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011, using taxpayer cash but struggling to contain the crisis and almost bankrupting Ireland.

Moreover, the French Finance Minister Pierre Moscovici further indicated that the EU ministers also agreed to using the euro zone's rescue fund, the European Stability Mechanism, to help banks in the area.

Europe can now focus on building the next pillar of a project to unify the supervision and support of banks in the euro zone, known as "banking union," Reuters reported.

Source: News Agencies, edited by website team