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Lithuanian Presidency reaches political agreement on bank bailout rules

Date

2013 12 12

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In a major step for the Banking Union, the Lithuanian Presidency has on December 11 in Strasbourg reached a political agreement with the European Parliament on the directive setting out the bank bailout rules and paving way for the creation of the Single Resolution Mechanism.

Bank Recovery and Resolution Directive is a powerful tool set for both prevention and in case of resolution. Most importantly, it is dedicated to save tax payers money. That is one of the major steps in developing Banking Union and fulfilled task for Lithuanian Presidency,“ said Rimantas Šadžius, Lithuanian Finance Minister and Chair of the ECOFIN Council.

It was agreed to have strict bail-in rules, which would ensure less moral hazard in the financial system and protection of tax payers’ interests in financial crisis situations.

The bail in regime will be introduced from 2016, bringing forward the date from what had been reached in the Council back in June when general approach was agreed.

The target level of the resolution fund has been set at 1 per cent of covered deposits and shall be reached by 2025. It is possible to use the Deposit Guarantee Scheme in resolution, but only with sufficient safeguards in order to preserve for its direct purpose, to compensate covered deposit in case of bank bankruptcy.

The Council and the Parliament will in the nearest future finalize the remaining technical issues.

The Directive should enter into force in 2015.