EU prohibits taxpayer money from saving failing banks.
On Tuesday, the EU proposed making it harder for governments to provide banks billions of euros in public aid like Italy did with Monte dei Paschi di Siena six years ago.
The EU executive wants banks to have enough resources, including debt that can be written down to provide cash in a crisis to avoid taxpayer bailouts.
The European Commission noted that bank failures still occur after Silicon Valley Bank and Signature Bank failed in the US, and UBS took over Credit Suisse last month.
“Today’s proposal will enable authorities to organise the orderly market exit for a failing bank of any size and business model, with a broad range of tools,” the commission said.
After the 2007–09 global financial crisis, policies were updated to prevent “too-big-to-fail” banks from leaving taxpayers on the hook.
The Single Resolution Board handles the failure of a large bank in the bloc, while the next tier of lenders is subject to national practices that may use taxpayer money.
The ideas simplify and standardize EU resolution rules for this next layer of lenders.
They also make it harder for governments to provide precautionary capital, as Italy did for Monte dei Paschi di Siena in 2017.
Payback or bank sale dates must be specified.
A 2015 plan for a pan-EU deposit guarantee program, opposed by Germany, is not revived. The 100,000-euro ($109,450) account protection remains unchanged.
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