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European leaders are working towards a June timetable to set minimum standards for individual deposit guarantee plans at the 27 Member States, a key part of the proposals for a banking union that places regulatory authority in the hands of the European Central Bank.
Cyprus’s depositors aren’t covered by deposit guarantee rules because the state is insolvent, German Finance Minister Wolfgang Schäuble said. “The media falsely created the impression that deposits are not safe in other countries", Schäuble said. “They are safe, though only on the proviso that the states are solvent.”
Schäuble said Germany put pressure on Cyprus to impose the tax in exchange for a €10 billion loan. “Naturally, the Cypriot president tried to find a way around it, but there was none and so we said if this programme is to be realised then this financial contribution is necessary”, he said.
Policymakers working on the bank resolution regime must decide whether depositors should rank higher or equal to bondholders in future bank failures. In Cyprus, senior bondholders will see no decline in the value of their holdings. That “runs completely counter” to the purpose of EU legislation on deposit guarantees, according to Elisa Ferreira, the member of the European Parliament leading work on the bank recovery and resolution directive for the Socialist group. “We are calling for a depositor preference so that depositors would be the first to be repaid in an insolvency and would be bailed-in after senior creditors in a resolution”, she said. “What has been done goes completely against the spirit of the commission’s proposal on bank resolution.”
German Chancellor Angela Merkel said she would work with other leaders in Europe to ensure the stability of the eurozone. "In our political functions we have worked to ensure the stability of the eurozone as a whole", Merkel said. "We have done this in past years and will continue to do so as we have in these days with Cyprus. Here too we want to ensure the euro remains stable overall."
Reuters, 18.3.13 © Reuters
The eurozone can't lend Cyprus more than agreed, French Finance Minister Pierre Moscovici said on Tuesday. "Above €10 billion, we are entering into a size of debt that is not sustainable." The minister said the eurozone wanted to see more transparency in the Cypriot banking system, but declined to comment about the role of Russia and Russian depositors in Cyprus.
Reuters, 19.3.13 © Reuters