Bank bail-outs will 'never again' be financed by the taxpayer, says European Parliament

A meeting in European Parliament yesterday (Tuesday) led to the green light being given for a banking self-funding pot.

This 'insurance policy' aims to set up a common fund of at least 55 billion euros to cover the closure of ruined high-street banks, guaranteeing money held on deposit up to 100,000 euros.

The banks themselves will be obliged to make a set contribution, and have eight years to do so.

Where EU member States decide to opt out of the common fund, their banks will be required to set up their own buffer zone of one per cent of total deposits, within a maximum of 10 years.

Banks in all of the European Union's 28 member countries are obliged to have enough capital in reserve to guarantee that in the event of a sudden closure, it would be able to cover the deposit accounts of all customers, up to a maximum per person of 100,000 euros.

And all savers have the right to request their bank hands over their entire savings, up to a maximum of 100,000 euros, within seven days.

Taxes levied on banks will cover any future need to bail out financial institutions which are about to go under, rather than the EU supplying a loan which the nation needs to pay back through raising taxes and reducing public funding, as was the case when Spain applied for a bail-out credit in the sum of 100 million euros.

Shareholders and creditors will be the first to bear the brunt of any financial problems affecting banks in the future.

The three-pillar banking structure reform, part of which was created in 2013, was rushed through following the bail-out of Cyprus.

In Spain, the rescue operation involved merging the two bankrupt entities Bancaja and Caja Madrid, which are now trading as the State-owned institution Bankia.

Recently, Bankia floated its first shares on the Spanish stock market in a tentative initial step to privatise itself, and predicts that within approximately two years it will be a fully private-sector entity and will have paid back its bail-out funds.

But in the meantime, the loan from Europe came at a price in Spain – mostly to banking employees, businesses and the ordinary citizen.

Conditions attached to the funding meant banks were forced to shut branches and shed staff, whilst the government was ordered to raise taxes, including IVA, and make cutbacks in public funds to repay the debt.

These drastic measures are also aimed at reducing Spain's deficit to levels required by the Troika – the European Union, the International Monetary Fund (FMI) and the Central European Bank (BCE).

This is in spite of the fact that Spain's State deficit is not dramatically high, especially compared to some of Europe's financially-weakest nations.

Recent and damning reports from the European Commission say funding cuts and tax hikes in Spain have increased poverty, made the middle classes poor and done nothing to reduce unemployment – despite these financial reforms having been imposed upon Spain by Europe itself, which continues to push for Rajoy to make more dramatic changes in the same vein.