Wed Mar 20th, 2013 at 05:32:06 AM EST
Eurointelligence: European Commission redefines deposit insurance (March 20, 2013)
This is hugely damaging. According to eKathimerini, a European Commission spokesman explained on Tuesday that deposit guarantees are only operative "in the event of a bank failure" and that a deposit levy is "a fiscal measure applied to all bank accounts", not to those in failing banks. Reuters quotes Klaas Knots, president of the Dutch central bank, as saying that bank customers should get used to the idea of this type of bail-in, at least for as long as the eurozone has no common bank resolution policies.
Since they are now using the levies as a protection against bankruptcy, the result is that banks do not go bankrupt because the insured depositors pay through a levy. Through this legalistic reasoning, the Commission has single-handedly voided all deposit insurance through the EU, or rather rendered it pointless. It means that all deposits, in all EU states, should be considered uninsured.