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New European Commission blueprint to avoid taxpayers having to bail out failed banks
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Published on 06-06-12

The European Commission today adopted proposals to allow effective intervention before banks get into insoluble difficulties and to ensure that restructuring and resolution costs fall upon bank shareholders and creditors rather than the public purse.

In order to maintain essential financial services for citizens and businesses, governments have had to inject public money into banks and issue guarantees on an unprecedented scale: between October 2008 and October 2011, the European Commission approved €4.5 trillion (equivalent to 37% of EU GDP) of state aid measures to financial institutions. This averted massive banking failure and economic disruption, but has contributed to damaging public finances and failed to settle the question of how to deal with large cross-border banks in trouble.

    Commissioner Michel Barnier

    Commissioner Michel Barnier

    EC President José Manuel Barroso said: "The EU is fully delivering on its G20 commitments. Two weeks ahead of the summit in Los Cabos, the Commission is presenting a proposal which will help protect our taxpayers and economies from the impact of any future bank failure. Today's proposal is an essential step towards Banking Union in the EU and will make the banking sector more responsible. This will contribute to stability and confidence in the EU in the future, as we work to strengthen and further integrate our interdependent economies"

    Internal Market Commissioner Michel Barnier said: "The financial crisis has cost taxpayers a lot of money. Today's proposal is the final measure in fulfilling our G20 commitments for better financial regulation. We must equip public authorities so that they can deal adequately with future bank crises. Otherwise citizens will once again be left to pay the bill, while the rescued banks continue as before knowing that they will be bailed out again."

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    Last update: 08/06/2012  |Top