EU deal pushes cost of bank failure on investors, savers

[CityFarmer]

Hmm... SSHs share the burden of saving a bank is reasonable... major creditors (bondholders) are logical since they are sharing the same boat..., but major customers (wealthy saver) to share too? "Wealthy" becoming a dirty word nowadays ...

EU deal pushes cost of bank failure on investors, savers

BRUSSELS — The European Union (EU) has agreed to force investors and wealthy savers to share the costs of future bank failures, moving closer to drawing a line under years of taxpayer-funded bailouts that have prompted public outrage.

Finance ministers from the bloc’s 27 countries yesterday unveiled a blueprint stipulating that shareholders, bondholders and depositors with more than €100,000 (S$164,700) should share the burden of saving a bank

http://www.todayonline.com/business/eu-d...ors-savers

[specuvestor]

That's where the fine line between depositors and lenders are blurred... Looks like the cyprus model is here to stay... question is whether it will go beyond europe's shores? Otherwise flight of capital is real.

[Greenrookie]

Hmm... Can't understand why are they doing this? I seriously doubt the rest of the world will adopt this. Even if the world agrees this is the way to go, it will be many years before countries outside Europe adopt this. Most prob, countries like Singapore would rather gain from the flight of capital out of Europe to build the wealth management industry. What are they thinking? Or is there something I am missing here?

[felixleong]

haizz I think its quite unfair that depositors should take the damage too
I think its more fair if only shareholders and bond holders pay for the losses only, if there's still a bill at the end then no choice have to use taxpayer's money

[pianist]

I think the right way to do first is to cut the fat wages and over-spending over at the public sector side.

[hyom]

Here is my humble opinion of a fairer system for bailing out banks;

- Get bondholders to take 100% loss first.

- After bondholders are wiped out, get shareholders to take 100% loss.

- After shareholders are wiped out, press criminal charges on the bankers responsible for the reckless lending and fine them so much that they are wiped out financially.

This is not only effective and but also fair. Engineers like me are liable for criminal negligence if the safety-critical products we build fail. Why should bankers not be liable when lives, retirement and families are broken up caused by money issues? A robber can only rob the money in your wallet. A rogue banker can rob all your life's savings in the bank account. Why should robbers be jailed and bankers go scot-free or even be perversely rewarded with huge severance bonuses?

A law to have bankers on the hook for criminal negligence is much simpler to execute than 100-page regulatory documents which can grow to 300-page documents because of strong lobbyist special-interest groups.

- After bankers are wiped out, let the multi-millionaire account-holders suffer some damage because they have the most capacity to suffer. Thanks for your sacrifice.

- After the ultra-rich account holders are injured, then send the remaining pain to taxpayers.

What is not acceptable is for taxpayers to be at the top of the list in suffering pain. This happened in 2008 and is absolutely unfair. Taxpayers should not bail out bondholders, shareholders and the perpetrators themselves.