Photograph by Chandres
The European Union have agreed on a deal which establishes rules on who will pay for future bank bailouts without taxpayer money.
After seven hours of negotiation, the EU’s 27 finance ministers finally reached agreement in the early hours of this morning on creating a banking union with an aim of restoring stability to Europe’s struggling banking sector.
The rules set out the order in which investors and creditors will be forced to take losses when a bank is restructured or closed down, with taxpayer funded bailouts only a limited last resort. This means that the financial sector will have far greater responsibility in finding solutions for its own problems, with bank shareholders and creditors the first to take losses.
This agreement comes a year after the EU leaders pledged to create such a banking union, but since this announcement the project has stalled on various occasions, most notably because richer countries feared having to pay for the banking problems in other countries in the bloc. The clear rules set out in today’s agreement, however, look to overcome these obstacles.
