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FACTDROP: Schaeuble wants investors involved in future bailouts: report


Schaeuble wants investors involved in future bailouts: report

By Reuters
April 20 2013

BERLIN: Germany's finance minister said investors must be involved in future bank rescues in crisis states but added Cyprus, where a bailout is imposing losses on depositors, was still a unique case, a German magazine reported on Saturday.

Asked whether the charge on depositors in Cypriot banks was a one-off case, Schaeuble said: "The involvement of owners, bondholders and uninsured depositors has to be the norm if a financial institution runs into trouble," according to Wirtschaftswoche.

"Otherwise we will never get a grip on the moral hazard problem whereby banks which do risky business make big profits but then burden the general public with their losses when they fail," he was quoted as saying.

"That cannot be allowed."Last month Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, said Cyprus' rescue programme represented a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors.

His comments unnerved markets and he later put out a statement that Cyprus was a specific case, that plans were tailor-made for each situation and no models or templates were used.

Schaeuble was quoted as saying Dijsselbloem had been unfairly pilloried for his comments.

"But he said Cyprus could be a 'template' for the future. Financial markets misunderstood that, thinking there was a risk of Cyprus happening elsewhere. But that is not the case because Cyprus is a very unique case."

Cyprus and international lenders decided that depositors who had more than 100,000 euros in the two biggest Cypriot banks would lose some of their money to contribute to the recapitalization of the institutions, along with shareholders and bondholders.

Earlier this week a European Commission document showed they stood to lose up to 8.3 billion euros through the restructuring of the two institutions.

Schaeuble said Cyprus would get 10 billion euros in aid, adding that it would not get any more because otherwise the island's debt sustainability would not be guaranteed.

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