BRUSSELS, Dec. 12 (Xinhua) -- The European Parliament has approved a series of crucial rules such like setting orders when writing off failed banks, taking fundamental step towards the completion of the Banking Union, according to a statement released on Thursday.
"With these new rules in place, massive public bail-outs of banks and their consequences for taxpayers will finally be a practice of the past,"said Michel Barnier, European Commissioner for Internal Market and Services, referring to the so-called Single Resolution Mechanism (SRM), which would step in to close a bank at risk before it could do too much damage to the wider economy.
The new rules approved by allow authorities to intervene decisively both before problems occur and early on in the process if they do.
According to the statement, the costs of bank failure starting with bank shareholders and creditors, and backed by financial support from resolution funds sourced from the banking sector and not taxpayers. If additional resources are needed, these will be taken from the national, pre-funded resolution fund that each Member State will have to establish.
"Deposits under 100,000 euros (137,000 U.S. dollars) will be entirely exempt from any loss, and deposits of natural persons and SMEs above 100,000 euros will benefit from a preferential treatment ensuring that they are do not suffer any loss before all other secured creditors' claims are absorbed. The bail-in tool will apply as from 1 January 2016,"illustrated by Barnier.
With regard to the source of resolution fund, the statement noted it will be financed by the banks themselves will have to be established and funded up to a level of 1 percent of covered deposits within 10 years.
EU ministers inch towards "banking union"
BRUSSELS, Dec. 11 (Xinhua) -- European Union (EU) Finance Ministers on Tuesday edged closer towards an agreement on a "banking union" designed to close down failed banks in order to prevent banking crises.
"We have no formal result in our pocket or on the table, but we made a huge leap forward in defining the concrete directions and schemes," said Lithuanian Finance Minister Rimantas Sadzius, referring to the so-called Single Resolution Mechanism (SRM), which would step in to close a bank at risk before it could do too much damage to the wider economy. Full story