After six months of difficult negotiations, the European Parliament reached a deal with the EU member states on the recapitalization of the European banks, said Michel Barnier, the commissioner responsible for internal market and services. This system is one of the main three elements of the future banking union.
This compromise is aimed to help to ensure that the Cypriot scheme would not be applied again. That time, part of the funds of uninsured clients (those who had deposits of over €100,000) was used for recapitalization.
The commissioner announced the decision after 16-hour series of night talks. The result of the negotiations is that now financial loss will be distributed between the owners and lenders of a bank in case of recapitalization or liquidation, not touching client deposits.
This decision gives the European Parliament the chance to vote for the recapitalization system before the election scheduled for May 25. Otherwise, the voting will be postponed at least until autumn. Plus there is another risk that new elected members of the European Parliament will lobby for their own interest in this issue that will cause difficulties. Moreover, a six-month delay may lead to a further hold-up on the creation of the banking union, which initially was supposed to be launched in 2012, but now it is planned to be introduced in 2016.