The Telegraph reports on Friday that Greece’s systemic banks will be the first major test for the euro zone’s new “bail-in” rules, with the crux on avoiding a “haircut” on deposits in order to get the banking sector out of “zombie mode.”
According to the Teleghaph’s Mehreen Khan, “…with Greeks heading to the polls on Sunday, private sector creditors face uncertainty over whether they will be forced to suffer losses to keep the banking system afloat after months of economic turmoil.
Brussels has earmarked around 25 billion euros to recapitalize the country’s four biggest banks, but only 10 billion euros is immediately available to Athens under the terms of its new bail-out package.
Bank resolution will become more complicated after January 1, when new euro zone rules will force depositors to face the costs of rescue programmes.
Under the EU’s Bank Recovery and Resolution Directive (BRRD), shareholders and depositors will have to take a hit worth 8pc of their total liabilities before lenders receive official sector aid.
The rules have been designed to prevent the taxpayer bail-outs which imperiled governments in Spain and Ireland in the wake of the financial crisis. Deposits under €100,000 will still be protected under the new regime.
But the BRRD could well be flouted as soon as it comes into force at the start of the year.”