A single rulebook for the resolution of banks and large investment firms in all EU Member States entered into force 1 January 2015.
The rules will also ensure shareholders and creditors of the banks pay their share of the costs through a "bail-in" mechanism.
EU Commissioner for Financial Stability, Financial Services and Capital Markets Union, Jonathan Hill, said:"The Bank Recovery and Resolution Directive equipspublic authorities for the first time across Europe with a broad range of powers and tools to deal with failing banks, while preserving financial stability. From now on, it will be the bank's shareholders and their creditors who will bear the related costs and losses of a failure rather than the taxpayer."
Full press release
European Voice: Bank rescue rules aim to protect taxpayers
The banking recovery and resolution directive harmonises disparate rules in the various member states on rescuing banks. It is the first of three elements making up the EU’s so-called ‘banking union’.
Jonathan Hill, European commissioner for financial stability, financial services and capital markets union, said: “From now on, it will be the bank’s shareholders and their creditors who will bear the related costs and losses of a failure rather than the taxpayer.”
He said the directive would equip public authorities across Europe with a broad range of powers and tools to deal with failing banks, while preserving financial stability.
Under the new rule-book, all banks must prepare recovery plans setting out how they would react to a sudden deterioration in their financial situation, while authorities must draw up plans outlining how they would wind up the banks under their supervision. The rules set out how authorities co-operate when dealing with transnational banks.
A major element are rules governing who pays for losses incurred by banks, although these come into full effect only in January 2016.
A failing bank’s investors will be ‘bailed in’, with any additional funds needed to be taken from resolution funds built up by the banking sector.
This means that creditors, investors and banks will meet the cost of future bank bailouts rather than governments and taxpayers. Their respective share of liabilities will be determined by regulatory authorities.
© European Commission
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