EU agrees to push cost of failed banks onto investors

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European Union finance ministers have agreed on an outline for plans to rescue troubled banks without leaving taxpayers with the bill for the bailout.

The reforms involve rules to force losses on creditors and shareholders in failed banks, followed by savers with deposits of more than €100,000 (£85,000). If this was not enough to save the bank, then governments would step in.

The deal follows over a year of talks on how to take the burden of bank rescues away from taxpayers and were agreed after seven hours of negotiations yesterday. Dutch finance minister Jeroen Dijsselbloem told Reuters: “For the first time, we agreed on a significant bail-in to shield taxpayers.”

Dijsselbloem adds: “The financial sector itself will now to a very, very large extent become responsible for dealing with its own problems.”

Since 2008 Europe’s taxpayers have given around €1,600bn of support to banks, prompting outrage among the public. The equivalent of around one-third of the EU’s economic output was used to help struggling banks between 2008 and 2011, leading some member states to the brink of bankruptcy.

Yesterday’s agreement will now be put before the European parliament, in a process that could run until the end of the year and see final rules implemented by 2018.

Irish finance minister Michael Noonan, who chaired the latest talks, says: “Our aim is to have a common approach throughout Europe so our taxpayers no longer have to shoulder the burden. This establishes ‘bail-ins’ as the new rule.”