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Expat funds in EU banks may be risking Cyprus style grab
| Published: | 23 Aug at 6 PM |
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A new EU law quietly passed on 1 August may lead the way to a Cyprus-style grab of expat funds in Eurozone bank accounts.
The new law, apparently sneaked through whilst most EU citizens were on holiday, is intended to deal with the inevitability of bank failures in Eurozone countries. Many expect it to spread to non-Eurozone EU member states, with the result that no depositors will have protection from a similar percentage grab to that which recently decimated Cyprus expats’ savings.
According to the International Business Times, the rapidly drafted legislation overhauls EU policy on bumper bank bailouts. At present, the law only applies to Eurozone countries, but is an EU law easily transferred to non-Eurozone states.
Basically, the law states that, in the event of future bank failures, there will be no central bank bailouts, with the bank’s creditors and shareholders forced to bear the brunt of the failure. For creditors, read account holders.
Those who follow the coalition government’s statements on finance may note a similarity to a recent statement by George Osborne, who said that taxpayers’ money will not be used to bail out failed banks as it will be the responsibility of the banks’ owners and creditors. Osborne seems have missed the point that account holders, or ‘creditors’, are themselves taxpayers.
German financial media is interpreting the law as a free pass to cancel all fund guarantees, even on amounts under €100,000. Rumours abound that the EU parliament is demanding bank deposits over the €100,000 mark must be confiscated within five days of a banking crisis.I
n addition, suggestions that savers with less money in the failed bank could well be hit with a penalty tax. Add to this scenario the likelihood of restricting cash withdrawals to very small amounts as was done in Cyprus, and expat savers could be facing the perfect storm.
The new law, apparently sneaked through whilst most EU citizens were on holiday, is intended to deal with the inevitability of bank failures in Eurozone countries. Many expect it to spread to non-Eurozone EU member states, with the result that no depositors will have protection from a similar percentage grab to that which recently decimated Cyprus expats’ savings.
According to the International Business Times, the rapidly drafted legislation overhauls EU policy on bumper bank bailouts. At present, the law only applies to Eurozone countries, but is an EU law easily transferred to non-Eurozone states.
Basically, the law states that, in the event of future bank failures, there will be no central bank bailouts, with the bank’s creditors and shareholders forced to bear the brunt of the failure. For creditors, read account holders.
Those who follow the coalition government’s statements on finance may note a similarity to a recent statement by George Osborne, who said that taxpayers’ money will not be used to bail out failed banks as it will be the responsibility of the banks’ owners and creditors. Osborne seems have missed the point that account holders, or ‘creditors’, are themselves taxpayers.
German financial media is interpreting the law as a free pass to cancel all fund guarantees, even on amounts under €100,000. Rumours abound that the EU parliament is demanding bank deposits over the €100,000 mark must be confiscated within five days of a banking crisis.I
n addition, suggestions that savers with less money in the failed bank could well be hit with a penalty tax. Add to this scenario the likelihood of restricting cash withdrawals to very small amounts as was done in Cyprus, and expat savers could be facing the perfect storm.
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