BRUSSELS, March 20 The euro zone's fund for
financing the closure of failing banks will be able to borrow on
the market or raise fresh funds from banks to replenish spent
money to make sure it always has enough to do its job, officials
and lawmakers said on Thursday.
European Union policymakers have agreed on how to set up an
agency that would wind down collapsing banks and how to provide
it with money to cover the costs of the closure.
The money will come from a fund filled by banks from annual
contributions which is to reach 55 billion euros after eight
"The logic is that whatever the fund needs above what it
has, it can borrow from the market. It will then get its money
back from the banks and pay back the loans," one senior euro
zone official said.
The fund will not have access to the euro zone bailout fund
or be given government guarantees, because that would indirectly
expose euro zone taxpayers, officials said.
"There is no legal limit on the fund's borrowing," a second
senior euro zone official said.
But if closing down a bank were to cost more money than the
fund has, it could borrow it from the market. It would then pay
back from contributions from banks that it would collect in the
future, because taxpayer money will not be tapped.
"The more the fund is used, the more it has to be
replenished," said Sven Giegold, a German lawmaker involved in
He said there will, however, be provisions that act as a
safety valve to prevent any overburdening of banks with extra
Policymakers have agreed that two years after the creation
of the fund next year, 60 percent of what all banks in the euro
zone have paid in will be made available to all countries to
finance potential bank closure expenses.
From then on, each year the amount of all accumulated
contributions available to all euro zone countries will increase
by 10 percent annually until all the contributions are fully
mutualised after eight years.
ECB President Mario Draghi said that plans to allow the new
'resolution' or clean-up fund to borrow to top itself up looked
"The point we've always made is that we need a mechanism
that is properly funded, and the agreement actually improves the
existing funding," Draghi told journalists, adding that he had
yet to see the details on how this would work.
(Reporting By Jan Strupczewski, John O'Donnell; Editing by Hugh