EU finance ministers agreed today agreed that any future banks on the verge of failure will be subjected to “bail-ins” in a similar manner as the banks in Cyprus. This means that investors and depositors will lose some or all of their bank assets over the government-guaranteed €100,000 ($130,000).
“For the first time, we agreed on a significant bail-in to shield taxpayers,” said Dutch Finance Minister Jeroen Dijsselbloem, referring to the process in which shareholders and bondholders must bear the costs of restructuring first.
This blueprint or template for handling “bad banks” is intended to partially shield taxpayers in stable countries like Germany and the Scandinavian states from having their taxes used to bail out failing banks. EU taxpayers have paid for bailouts in Ireland, Portugal, Spain, Greece, Cyprus, and Italy.