A new deal for bank bailouts

The European Union has moved one step closer to forming a long-heralded banking union after finance ministers agreed on a new deal for bank bailouts. According to the deal, in the future, taxpayers will not take the first hit when struggling banks need a helping hand. Instead, the bank’s creditors and shareholders will take the first hit, followed by those with savings of over $130,000 in the bank. A taxpayer funded bailout of failed banks will now only be a last resort. The agreement to “bail in” rather than bail out failing banks represented a fresh approach to the way that the European Union addresses the kinds of crises that have in recent years crippled places like Cyprus and Ireland and threatened to sink the euro. “Where bailout used taxpayers’ money and state assets to resolve banking difficulties, the future mandate is ‘bail-in,’ where the assets of the bank itself will be liquefied to fill the holes that emerge in the banking system,” said Michael Noonan, the Irish finance minister, who who chaired the talks as current holder of the EU presidency. The draft bill still needs the approval of the European Parliament before it can become European law, said Mr. Noonan, who added that it should be fully in force by 2018.