The government is due to adopt in Parliament on Wednesday the Bank Recovery and Resolution Directive (BRRD), European Union law on streamlining credit institutions and investment enterprises. Greece has to adopt the BRRD as part of the prior actions required for talks to begin on a third bailout.
The directive includes the so-called “bail-in” – the participation in the cost of bank resolution of all those who have funded the lender in question. This relates to shareholders, bond holders and depositors. Banking sources stress that while the bill sets the bail-in process – previously applied to Cyprus banks – in stone it also strengthens the safety net for guaranteed deposits, i.e. 100,000 euros per owner per bank.
This directive creates for the first time a European Union-wide framework for the resolution of banks and of investment enterprises. It requires a bank to have up to 8 percent of its capital requirements covered by the people who have funded it for the lender to be considered sustainable.