Discord among Ecofin ministers over Eurozone bail-in rules

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EcoFin ministers meeting today to discuss European Union banking union and bank bail-in rules have seen minimal progress made. There has been little harmony during discussions.

The EU's Tonio Borg believes there is a long way to go before a bail-in deal is made saying that non-Eurozone countries are in a fundamentally different position regarding bank resolution plans. These countries would be unable to access the European Central Bank (ECB), and bail-in rules could increase risks for them as a result.

The EU's Michel Barnier has said that depositors should be bailed in to save banks, with deposits below €100,000 treated as sacrosanct. Jorg Asmussen stated that depositor writedowns should be a "last resort". However many remain sceptical that small depositors can be protected in the case of crisis.

The European Union has at present been unable to draw up clear bank resolution rules five years after the 2008 crash. Asmussen said that such tools are a matter of urgency with Jeroen Dijsselbloem adding that rules need to take effect as soon as possible. However Vitor Gaspar stated that while the EU is aware of the urgency, what matters most is the preservation of the single market.

Dijsselbloem voiced support for bail-in-able buffers, such as co-co bonds. However the rules for the issue of these is still unclear. Our banking reporter Tim Wallace explains the mechanism:

The instruments act as debt when issued, but can convert into equity if the bank gets into trouble. The bail-in bonds are popular with markets and backed by regulators, but need shareholders’ permission as the conversion to equity dilutes the existing owners.