EU proposes sharing cost of bank closures

http://www.theguardian.com/business/2013/dec/15/eu-proposes-sharing-cost-of-bank-closures-eurozone

Version 0 of 1.

The cost of closing down a eurozone bank will initially be borne by its home country, but eurozone partners will eventually share the obligations of fellow currency bloc members after 10 years, under the terms of an European Union proposal.

The proposal, prepared by Lithuania which holds the rotating presidency of the EU, will be discussed at an extraordinary meeting of senior officials in Brussels on Monday. Separately, several European finance ministers and senior EU officials will meet again in Berlin to try to make further headway on a compromise for rules to wind down stricken banks. After a financial storm that toppled banks and dragged down states such as Ireland and Spain, countries are considering a fresh blueprint outlining what to do when a bank fails as part of a drive to create a banking union.

Sealing a deal before an EU summit in Brussels this week will allow Germany's Chancellor Angela Merkel and her peers to trumpet an important overhaul of banking.

Under the proposal, the costs of closing down a bank in the first year of operation would be fully covered by a fund set up by the home country where the bank resides.

All the national funds for closing down banks would be merged into one single resolution fund for the eurozone after 10 years and from that moment the Single Resolution Fund would finance all bank closures.

Our editors' picks for the day's top news and commentary delivered to your inbox each morning.