EU Directive BRRD enters into force on January 1st

The European Union (EU) will implement from January 1st, 2016 the directive BRRD, the Bank Recovery and Resolution Directive. This consists of a “bail-in” process with to view to restructuring banks which would be on the brink of collapse. Private individuals’ deposits above €100,000 could now be legally used in order to cover the bank’s deficit, as a third resort after shareholders and creditors.

A precedent took place in Cyprus in 2013 when 47.5% of all deposits above €100,000 at the Bank of Cyprus were levied. According to the EU, such a mechanism should prevent any future bail-out by States and protect the banking sector from domino collapses. Not only savers are now being exposed but this BRRD directive could incite them to substantially cut their savings, this way jeopardizing banks’ accounts.