No more public money for banks: how Brussels wants to avoid the “MPS leak”

Avoid a new Monte dei Paschi “style” bailout for distressed banks, which restricts the use of public money and makes it easier for account holders to move their accounts from one institution in crisis to one that is healthier. According to the Financial Times, the bill the European Commission is working on provides for this.

The Brussels measure had been anticipated for weeks, but the industry turmoil caused by the bankruptcy of the Silicon Valley bank and Credit Suisse may have slowed the Commission’s work. The declared goal is to strengthen the so-called banking union, that is, a set of measures developed by Europe after the financial crisis, aimed at protecting taxpayers. To date, EU rules have made it difficult for public money to be used for major bank bailouts. But that didn’t stop Italy from getting the green light from Brussels in 2017 to use the 5.6 billion euros from state coffers and help MPS.

According to the Financial Times, this measure was made possible by a “gap” found by the Italian authorities: support to the MPS was provided in cash on a “precautionary” basis and therefore not structured as state aid, on the contrary. bank resolution rules. The new rules the Commission is working on should make it harder to exploit this loophole.

Another key point of the Brussels proposal will concern account holders: Again, according to the Financial Times, the EU Commission wants to make it easier for depositors to transfer cash from institutions in distress to healthy ones. Another important aspect of the draft is the extension of anti-bailout rules to small banks as well. The proposal requires the European Central Bank, which oversees the largest lenders in the eurozone, or national financial regulators, which oversees smaller banks, to immediately notify a credit institution “at risk of or possible bankruptcy”. According to the draft, the amendments will ensure “consistent application of rules in all Member States, providing a wider playing field, while protecting financial stability and depositors, preventing contagion and reducing dependency on taxpayers’ money”.

Source: Today IT

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