BRUSSELS, March 26 (Reuters) – In bailing out Cyprus and
taking funds from savers instead of taxpayers, the euro zone has
crossed a Rubicon with implications for future banking rescues
in other countries despite assertions that the crisis in the
island nation is unique.
CYPRUS: ONE-OFF OR TEMPLATE?
Eurogroup Chairman Jeroen Dijsselbloem caused uproar in
financial markets by saying in an interview with Reuters and the
Financial Times that the Cyprus solution gave a flavour of how
Europe would handle future bank crises, by making banks solve
their own problems rather than using European taxpayers’ money.
Finnish Prime Minister Jyrki Katainen supported him, saying
that “bail-in” thinking should guide a planned European banking
union, but clarified that he did not necessarily mean depositors
should be hit in future.
ECB policymakers sought to calm the ensuing storm and
reassure savers throughout Europe by pointing out that Cyprus
was unique in that its banks were largely funded by deposits
rather than by issuing bonds and shares.
The European Commission said it might be possible for large
uninsured depositors to be “bailed-in” as part of the future
resolution of a bank under a new draft EU law, but savers with
less than 100,000 euros ($128,600) would not be hit.