ECONOMY

European Commission rules out haircut on ‘safe’ deposits

Antoine Colombani, a spokesman for European Commission Vice President Joaquin Almunia, has refuted a suggestion by SYRIZA Euro MP Nikos Chountis that the European Union might decide a haircut of state-guaranteed deposits of under 100,000 euros.

In a press release distributed to journalists following a parliamentary question earlier this week, the leftist MEP said that the Commission had not ruled out a haircut on “safe deposits.”

In an official statement late Wednesday, Colombani rejected Chountis’s allegations saying that EU state aid rules do not require any contribution whatsoever from bank deposits.

“Deposits are excluded from the scope of burden sharing. This means no contribution is required from any deposits, whether insured or uninsured, when a bank receives state aid. Indeed, burden sharing obligations under EU state aid rules relate exclusively to shareholders and junior bond holders.”

The statement also stated the following on insured deposits:

“The proposal on Bank Recovery and Resolution (BRRD) stipulates explicitly that so-called covered deposits, i.e. deposits below EUR 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. Instead, the losses would be borne by the Deposit Guarantee Schemes – up to the amount of covered deposits (Article 99). 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 EUR 100 000 from end-2010 onwards in all Member States (Article 7 of the DGS Directive).”