Competition Commissioner Joaquin Almunia has issued a statement to clarify his reply to a Greek MEP that when banks are being granted restructuring aid, “if a Member State decides to apply additional burden-sharing measures [to those outlined in EU regulations], it would be a sovereign decision of that Member State.” But the clarifications issued by the Commissioner’s office appear to refer to a 2010 Directive that does not make explicit provisions for the possibility of bail-ins such as that applied in Cyprus in Spring 2013.
After Almunia’s assurances that “EU state aid rules do not require any contribution whatsoever from bank deposits” Nikos Hountis, MEP for Greece’ leftist SYRIZA main opposition notwithstanding, is calling upon that the Commissioner to change his reply to the parliamentary question Hountis filed, the Greek press reports.
“Burden sharing obligations under EU state aid rules relate exclusively to shareholders and junior bond holders,” Antoine Colombani, Almunia’s spokesman said in a press release.
Concerning insured deposits Colombani says that the proposal on Bank Recovery and Resolution (BRRD), which is expected to come into force in 2016, “stipulates explicitly that so-called covered deposits, i.e. deposits below €100 000 guaranteed by Deposit Guarantee Schemes (DGS), are excluded from the bail-in tool (Article 38). Therefore, depositors having such deposits would never bear any losses.”
Until the BBRD comes into force, Colombani says that the losses would be borne by the Deposit Guarantee Schemes (DGS) - up to the amount of covered deposits.
“It is also impossible to bail-in covered deposits before the entry into force of the BRR Directive since it would be an infringement of the existing DGS Directive that ensures protection of deposits up to €100 000 from end-2010 onwards in all Member States (Article 7 of the DGS Directive).” the statement concluded.
But Hountis, who was today accompanying SYRIZA head Alexis Tsipras during his visit in Brussels and unavailable for comment, has written back to Almunia saying that he is asking him “if [Almunia] desire, to change the reply you gave me… I remind you that among others your official reply says that if a Member State decides to apply additional burden-sharing measures, it would be a sovereign decision of that Member State, which is the issue of essence.”
Colombani refers to the Directive on Deposit Guarantee Schemes passed in 2010 - before the concept of bail-ins took hold during the Spring 2013 Cyprus bailout.
Article 7 of the Directive, which refers to the Deposit Guarantee Schemes, mainly deals with how depositors get access to their money in case this is unavailable in their bank account. Article 2 defines unavailable as “a deposit that is due and payable but has not been paid by a credit institution under the legal and contractual conditions applicable thereto” i.e. when a government or court decides the deposit is no longer available.
The directive appears to make no explicit provision for “additional burden-sharing measures” applied by member states.
You can read the entire Deposit Guarantee Directive - including the changes that were made to it until the EU institutions settled upon a final text and their justifications- here.
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