And this is why there should be a Brexit, an Italexit, a Frexit, a Nexit and so on.
Reuters is reporting that the European Union (EU) is considering permitting its member states to implement measures that would temporarily prevent individuals from withdrawing money from their bank accounts in order to stop bank runs from occurring.
Citing EU documents reviewed by the wire service, the proposal has been in the works since the start of the year and has been completed at a time when there was a run on Spain’s Banco Popular. Authors say that the primary objective of the measure is to assist lenders that are about to fail or are failing.
Early reports suggest that member states are divided on the issue.
Meanwhile, critics say that it could actually ramp up bank runs at the first hint, sign or report of trouble at a bank. Ultimately, it would discourage saving and long-term investing at any financial institution in Europe.
“We strongly believe that this would incentivize depositors to run from a bank at an early stage,” said Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group.
A solution being floated around is to permit depositors to withdraw “at least a limited amount of funds.”
More from the news outlet:
The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors’ powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000).
Under the plan discussed by EU states, pay-outs could be suspended for five working days and the block could be extended to a maximum of 20 days in exceptional circumstances, the Estonian document said.
Existing EU rules allow a two-day suspension of some payouts by failing banks, but the moratorium does not include deposits.
The Commission, which declined to comment on the discussion, had previously excluded insured deposits from the scope of the moratorium tool fearing it “may have a negative impact on market confidence,” according to a press release published in November.
Many states supported a suspension of payouts only during the so-called resolution of a failing bank – the process which imposes losses on lenders’ investors and possibly also uninsured depositors, while preserving the continuity of the banking activities, the document said.
Most countries opposed bolder plans for an early moratorium.
Simply put: this is evil.
Why anyone would keep money in a bank savings account at the current low interest rates is crazy. I have $25 in my savings account and everything else is in my checking and the money goes out every month to service debt and pay monthly expenses. Once the debt is zero in 2018 I will have $1,500 per month to invest and the money will be removed from the bank each month. I will then be using cash for 90% of my purchases. Only using plastic for on-line purchases, paying credit card balances in full each month.