Business World

Sunday 25 March 2018

Home countries to bear cost of closing banks

German Chancellor Angela Merkel
German Chancellor Angela Merkel

The cost of closing down a eurozone bank in future will initially be borne almost fully by its home country, under the terms of a new EU proposal.

But according to Reuters, the obligations of eurozone partners in future bank busts will gradually rise to be shared equitably after 10 years.

The proposal, prepared by Lithuania, will be discussed at an extraordinary meeting of senior EU officials in Brussels today. Separately, several European finance ministers and senior EU officials will meet in Berlin to try to make further headway on a compromise for rules to wind down stricken banks.

Countries are considering what to do when a bank fails. Sealing a deal will allow German Chancellor Angela Merkel and her peers to trumpet an important overhaul of banking, although their readiness to share costs of failed lenders may fall short of what had been hoped.

Under the proposal, the costs of closing down a bank in the first year of operation would be fully covered by a fund set up by the home country.

Funds would be filled from fees paid in by banks. If the money in a home country in the first year is insufficient, other funds in eurozone countries would be expected to contribute up to 10pc of their money. (Reuters)

Irish Independent

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