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What happens when a bank fails? Who pays? The European Commission is due to publish proposals that aim to 'minimise' costs for the taxpayer - and make sure the losses are taken by shareholders and creditors of the bank.

A 'key goal' is to ensure that cash machines and other 'essential everyday banking functions' keep working, says a BBC article that goes on to list Northern Rock, Icelandic banks, Lehman Brothers, Fortis and other banks that have failed as a result of the ongoing financial crisis.

However, any new EU rules aren't likely to come into effect until at least 2014 - and experts are worried about the state of European banks today.

"We are faced with a serious situation today," said Stefaan de Rynck, spokesperson for EU top regulatory official Michel Barnier, "but that does not stop us thinking about the future, and from us developing a vision about the future."

Here in the UK, the Chancellor is being urged to 'stand firm' on banking reforms, as the White Paper on the Banking Reform Bill is due to be published this month. Among other things, the Bill should separate retail and investment banking and introduce 'depositor preference' (which should make sure that people's savings and deposit accounts get repaid first when a bank fails).

Which? has carried out some research to find out what people in the UK expect in the way of banking reform. An online survey of almost 1,300 adults indicated that:

  • 71% didn't think the Government will act in citizens' best interests when it carries out banking reforms
  • Another 71% wanted retail and investment banking to be split up
  • 61% didn't think banks have 'learned their lesson' from the crisis
  • 76% didn't think the Government had done enough to avoid a repeat of the crisis.

Again, a lot of people see the timing as an issue: the laws aren't expected to be fully implemented until 2019.

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