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Sweden joined EU finance ministers reach draft agreement on bank bailouts

Thursday, 27 June 2013
Finance ministers from the European Union (EU) have agreed an outline plan on how to rescue troubled banks - without leaving taxpayers to face the bill. From the Swedish side of the agreement table, the Swedish Finance Minister, acknowledged that it was a "compromise Sweden can live with" but was not fully satisfied.

Even though they agreed on a common system to liquidate troubled banks, one of the steps towards a European banking union, Swedish Finance Minister Anders Borg (pictured right below) was not completely satisfied.
Anders-Borg
After the global financial crisis coupled with the sovereign debt crisis in the eurozone hitting hard the region's banking sector, one of the terms of the agreement was that banks' creditors and shareholders will take the first hits if a bank gets into distress. That will be followed by savers with deposits of more than 100,000 euro. If that is not enough, government help will be called upon and taxpayers will be among the last to shoulder losses.

One issue that has been important for Sweden in the negotiations was the idea that states should continue to be able to walk in and take over a troubled bank. That was something the Europeans wanted to agree on. The Swedish finance minister was not satisfied with that because it restricted Sweden's ability to deliver state capital at an early stage should a bank be considered to be en route to crisis.

The inability of Sweden to step in and save the Swedish banks, worries Sweden for it argues that it may lead to serious risks of a long economic downturn and high costs in terms of unemployment and lower growth.

One argument against that was put forward by the Dutch Finance Minister, Jeroen Dijsselbloem who said that the EU taxpayers have had to pay for a series of bank rescues in recent years. Therefore, Mr Jeroen Dijsselbloem saw the deal as a marked big change in the way that troubled banks are bailed out.

Earlier this month, ministers agreed guidelines on how the eurozone's emergency bailout fund can inject money directly into struggling banks.
The fund will be able to inject a total of 60 billion euros into troubled lenders but the bank's national government, and its lenders and depositors, will still have to share the burden of any rescue.
By Scancomark.com Team

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