(Clarifies reference to deposits in paragraph 4, adds dropped
word in paragraph 5)
* EU law to share pain of bank failure could come in 2015
* Lawmaker Hokmark says will shield small deposits
By Claire Davenport
BRUSSELS, April 23 The European Parliament's
lead negotiator on EU rules for dealing with failing banks said
on Tuesday the body was likely to back imposing losses on
wealthier depositors but shield small savers.
Talks are under way to finalise EU rules on crisis-hit banks
following the bailout of Cyprus, in which both large and small
depositors were originally going to be hit before the plan was
changed to charge only the former.
The European Parliament's backing is needed for any
proposals to become law.
Gunnar Hokmark, a Swedish conservative in the European
Parliament, said most categories of deposits would not be
protected under proposals likely to be agreed.
"There is a very clear exception for all deposits below
100,000 euros," Hokmark, who will lead negotiations with
European Union member states, told a news conference.
The European Parliament has an equal say alongside countries
when deciding who among a bank's creditors - bondholders or
depositors, for example - must bear the brunt of failures such
as those in Cyprus' banking sector.
Hokmark, however, pledged to protect small depositors in EU
legislation. "What happened in Cyprus shall not happen again if
this legislation is involved," he said.
The initial EU-Cyprus plan, which would have imposed losses
on smaller, insured depositors, prompted a large backlash both
from depositors and financial markets.
Although some policymakers have sought to portray Cyprus and
the losses suffered by depositors at two of its banks as a
one-off, many analysts believe it marks a change in tack in how
Europe deals with troubled banks, to spare taxpayers who have
been on the hook for previous bailouts.
Jeroen Dijsselbloem, who chairs meetings of euro zone
finance ministers, has said that in future, the bloc should ask
banks to recapitalise themselves, then look to shareholders and
bondholders and then uninsured depositors.
The European Commission has written the first draft of the
law about how to share out losses when banks run into trouble,
designed to prevent EU countries taking a variety of approaches
to deal with struggling banks and bondholders.
It is now up member countries and the parliament to decide
whether and when savers should face losses, when a failing bank
is being salvaged or shuttered.
The plan would mean that when banks need to be shut, the
costs would be lower for their home countries and potentially
also for the euro zone's rescue fund, the European Stability
Mechanism. But it risks scaring investors away from the
multi-trillion-euro market for unsecured bonds as well as
prompting depositors to move their money elsewhere.
The ECB, which will start supervising big banks in the euro
zone from the middle of next year, is also pushing for a
framework with 'bail-in' powers, and has suggested that
depositors get preference over other bondholders.
(Editing by Matthew Tostevin)